dare I hope?

My first foray into working out what I needed to do to secure my retirement scared me back to my books and my coffee and any distraction at all really. $1.5 million and your home? $500,000+ and your home? These seemed ridiculously out of reach. Then to add to my confusion, I started reading the Barefoot Investor and his nine steps to financial freedom.

Barefoot (aka Scott Pape), has “nailing your retirement number” as step eight.  As a shock (sarcasm alert), he says I need my own home (the only consistent part of this research so far) and $170,000 in super as a single. (That’s a current figure, not a future figure, something to keep in mind.) Pape says there is no retirement until you nail your “retirement number” and that, of course, more money is better. He is also quite clear that his numbers in the Don Bradman Retirement Strategy (as he calls it) are based around claiming the full aged pension. He also says this is a safety net.

So at first, I was “good grief, here’s someone whose financial advice that usually makes a lot of sense and he says I need less than $200K in super for a comfortable retirement”.  Then I took in the warning of “safety net” and realised I’d circled back to my original concern – counting on their being a reasonable aged pension in 2042.

As Barefoot says, there are actually four parts to his Bradman plan (detailed in his book or in this article from his website):  own your home, have $170K in super, claim the full aged pension and continue working a day or so a week.

After all of this I’ve got a goal of my own home (already on the list) and a value of investments/super/cash that ranges from $170,000 to $1.5 million. There is some difference in those numbers, isn’t there?

The thing is, I have dilly-dallied about starting this for too long already so I’m going to focus on the only consistent element of any of these: owning my own home while getting some extra into super and investments. Now I have savings but they’re not enough to be both a house deposit and to be my emergency fund. I know someone my age (and not unskilled or unwilling to work or shy about putting in applications) who took six months to get a new position after being made redundant. I know someone a decade or so older who, several years later, is still to find full-time work.  In fact, the average time out of work in Australia is apparently 10 weeks, but after 55 it’s 16 weeks for women and there’s an “even money” chance she’ll still be looking after a year.

That safety net in my bank took spending cuts and planning and time to build and I want it to stay there. It’s my life raft and it was hard-won and I know there are other ways it could be used but it’s staying.

Which I guess leaves me doing the other steps of the Barefoot financial freedom steps (and probably other things I haven’t encountered yet) and working my way up to a house deposit, over and above my savings. Savings I would also like to keep growing.

I’d also like to explore share investing on my own, outside of my super fund. I have to do some research on this but that would be an additional source of investment and keeps the risk away from my super fund, which should definitely be more than $170K at least, provided I am successful in being employed until I am 67.

Of course, all of this exploration of how much I need to retire, has not changed my base goals or actually provided a lot of clarity on actual dollar amounts but at least I have a path forward. I need to start with goal 3 (buy a house) while continuing to work on 4 and 5 while also looking at making the most from my fortnightly salary. I know I can do better there. Time to take stock.

For the non-Australian or non-cricketing tragics out there, Sir Don Bradman was a very famous Australian batsman. I might not be a cricket lover, but as an Aussie, I am required to know about The Don’s average of 99.94. I’ve never seen the theory tested, but I’m pretty sure not knowing that gets you sent to New Zealand.

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