Can you afford to retire early?

By Ali Roshan

Ever dreamt of retiring early? Yet without winning the lottery or inheriting a fortune from a long lost relative, just how possible is it to structure your finances so you never have to work again?

Many Australians working for a living, dream of the possibility of retiring early, spending their days travelling or playing golf or doing nothing much at all.

There’s even a name for it these:

FIRE – The Financial Independence, Retire Early movement

The FIRE movement is prompting more and more young Australians to question exactly what it takes to retire early. How possible is it to structure your finances so you never have to work again?

According to the Australian Bureau of Statistics, the average Australian retirement age is just 55.4 years [info link], which makes it seem that early retirement is somewhat the norm for Australians. However, this number is dragged down by partners who stop work while their spouses support them financially, and people forced into early retirement by redundancy or medical issues.

So, how plausible is it to stop working sooner rather than later?

The answer depends on how soon you start setting goals and saving for your retirement, the type of retirement you dream of, where you are hoping to live, and whether you have children or other dependents you need to support. It’s also more achievable if you can structure your life so you are still earning at least some income, whether from a positively geared investment portfolio, a hobby or something you love doing and would do anyway.

The Association of Superannuation Funds of Australia (ASFA) currently suggests a couple who owns their own home requires $62,000 a year ($640,000 in savings) [info link], to enjoy a comfortable retirement in Australia. At the other end of the scale, some people are eager to retire overseas to a country such as Indonesia, where living expenses can be a fraction of what they are in Australia.

The key to deciding whether you can retire early depends on just how determined you are to achieve it.

You need to think through your lifestyle requirements and determine if you need a simple caravan and campsite in rural or regional Australia, or whether you require a five-bedroom home in leafy metropolitan suburbia. You’ll also need to ensure your retirement savings are invested in quality assets that will continue to generate a strong, consistent level of income.

As your financial planners, we can help you with this.

A good tip is to keep your options open and your job skills up to date, in case you have a change of heart and decide you do want to go back to work, even if only on a part-time basis. In fact, you might be better off taking what is increasingly referred to as a mature age ‘Gap Year’ and try out what it’s like living overseas or spending all day on the beach before you quit your job.

While being permanently retired and free to live each day as you choose does sound wonderful, it’s still important to set yourself goals while in retirement. As always, the earlier you start setting goals and putting financial plans into place to achieve your early retirement dreams, the better.

Ali Roshan is an Authorised Representative (ASIC No. 000378611) of Lifespan Financial Planning

ABN 23 005 921 735 AFSL Number 229892

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