As a Financial Advisor one of the most frequent questions we get asked is, “How much money do I need to retire ?” This is not as simple as one would think as there are so many variables to consider and the landscape is constantly changing. One does not know how long one will live, what inflation will be and what returns one will achieve so assumptions need to be made and importantly one’s financial position needs to be reviewed regularly to ensure that one stays on top of your financial affairs.
With over twenty six years of advising clients I have personally witnessed both incredible and tragic retirements stories, ranging from retirees enjoying the most wonderful retirement without any financial pressures or concerns to the extreme opposite of elderly retirees having to cut back and stress over how long their income and capital will last.
Typically people are living longer, so one needs a larger retirement pot to see them through. Unfortunately many people start saving to late and retire with insufficient retirement savings. The big challenge is to live within your means, and actually only draw the income which your portfolio can generate and not withdraw the amount you need to maintain a lifestyle. With this in mind the question should be “how much income can I withdraw from my retirement savings ?”
Attached see Ninety One document that sets out a blueprint for 1) what percentage of a portfolio can be drawn as an annual income; and 2) what the portfolio needs to look like to maximise the probability of success. Success is defined as the ability to draw an income that increases with inflation for a period of 30 years or longer. The largest determinant of success is the starting draw-down rate. This is defined as the percentage of the portfolio you intend to draw down as an income each year.
Read Article Here: How much can I spend in Retirement – Ninety One