Do I Have Enough Money To Retire On?


Did you know the most common question we get asked as a firm is do I have enough money to retire on, or how long will my capital last? This is most likely driven by post retirement crisis, which is about outliving your assets.

Post retirement crisis is more or less magnified by poor financial decision making of retirees. I heard recently that 65% of retirees fear running out of money more than death. So how do you overcome this fear and bad decision making?

One way is to plan well in advance in your pre retirement days. Also, once you do retire, one of the things we tend to undertake is a thing called capital adequacy test. I.e. How long will my capital last based on my income expectations? How do I need to invest my money, and do I need to take unnecessary risk? But most importantly, will I be able to fund some of my capital expenditure from this lump sum of assets made up of superannuation, property, et cetera.

The only true way of doing that is to project using meaningful earning rates. What these assets will look like in growth? What kind of income you can generate and what the net after tax position is on that income.

This again is what we call capital adequacy test. How long will my capital last and am I going to be a person or be a 65% who retire and fear of running out of money more than death?