The latest “how much” figure is still scary but I have an update on the answer, from the March and April editions of Money magazine.
First up, yes, it’s May and I’m just now reading the back issues as they are very popular at my local library and rarely actually on the shelves.
I scan the magazine rack for Money when I first walk through the door, and then park myself in one of the many comfy chairs on offer to read whatever else has caught my eye because Money is so rarely on the rack. However, this week I was reminded the library digital portals have more than audiobooks. So now I can read many of my favourite magazines without violating the book challenge!
But back to talking about Paul Clitheroe. In the March edition he gives some good advice – work out how much your retirement is going to cost per year based on what you want to do, and then multiply by 17 (based on a retirement age in your 60s).
So add up how much it takes to run your home (yes, you guessed it, your own home that you’ve paid off) including not just the utilities but also the maintenance costs and any renovations you have planned, the cost of running your car, maintaining your health, buying your groceries, your hobbies, your travel plans.
In his column* Paul uses a $100,000 as both a nice, round figure and a nice lifestyle. So, if your annual requirement is $100,000 and you multiply by 17, you get $1.7 million.
“And that is about what you will need in investment assets to fund $100,000 a year, plus CPI, for potentially several decades,” Paul says in the March column.
He says a diversified portfolio (what the heck is that, by the way? different classes of shares and property? shares? I keep hearing the term but it seems to mean different things for different people) “would be likely to earn 4% to 5% above inflation”.
That sounds reasonable. And I know that right now, my annual expenses are about $60,000. If I had my own home (instead of renting), that would hopefully still cover maintenance costs, extra insurance and increasing medical expenses as I age.
So, $60,000 x 17 = $1,020,000. That’s less than the $1.5 million I was assuming but way more than I am on my way to having right now. But that’s what this blog is all about isn’t it? Working out how I can spend the next 24 years boosting my retirement lifestyle.
* Money Magazine, March 2018, “In your interest”, Paul Clitheroe, pages 10-11