And so we came to the last night of our first trip to Greece*, which naturally led my partner and I to discuss when we can kiss office life goodbye and start living a more outdoors and active life – every day. Mostly a simple life but always with some travel, exploration and new learnings on the horizon, without any obligation to earn an active income. And, in my case, a more meaningful life with plenty of time to work on projects that make sense to me. In other words, financial freedom – the final milestone of our 12-step financial plan. *Article originally published 6 October 2019.
Well, that was after I played around with the Discovery retirement tool to first make 100% sure that I’ve already reached the milestone where I no longer need to save up for Tannie Lizelle at age 70. Let’s be realistic, after 70 summers I might not feel like working anymore, or may not have the good health and energy needed to pitch up and keep clients happy. So, I’m making sure – as far as I can control my own destiny – that I won’t need to earn an active income after age 70.
Yes, the calculator confirms that even if I invest zero per month from now on for the next 23 years, that’s still a surplus. If I just leave everything I’ve saved up across my retirement products, tax-free account and offshore unit trusts, and only start drawing from those investments at age 70, I’ll have enough to draw an income of R26 000 per month in today’s terms.
Milestone 10 of my 12-point plan to financial freedom has been reached.
There is the minor detail that even though I can stop saving for my older self now, I still need to earn an active income of around R26 000 a month for the next 23 years until age 70 to live off. From where I’m standing, 23 years sound like a very long time. So, for now I’m staying in my job where I earn more than R26 000 and I keep on saving the excess, giving myself a chance to reach financial freedom, with a target amount calculated using the 4% rule, before age 55.
Next we moved on to do the same calculation for my partner.
This is where things started to slow down. And it had nothing to do with the Greek wine. There were certain fields that he wasn’t sure how to complete. Other than the fact that my partner is an intelligent human being, he also works in the industry – he’s an insider! But even he needed me to talk him through some of the terms and what exactly they meant.
So this blog post is for everybody out there who’s ever played around with a retirement calculator but got stuck and eventually gave up trying to figure out whether they’ll be OK in old age or not. This week we’ll use the Discovery tool and I’ll walk you through the input fields step by step. Next time we’ll tackle the 10x calculator.
That’s exactly what you think it is: your actual age – now.
Planned retirement age
There should be no doubt about this one either. (After you’ve entered all the data fields below and did the first round of calculations you can play around with this age, making it later if you have a shortfall and bringing it closer if you have a surplus in the result.)
Estimated life expectancy
The weirdest field to complete and highly personal. I use the age of my ancestor that lived the longest and died from natural causes (Ouma Kowie in my case) and then add 10 years to make provision for the advances in medical technology since her lifetime. Most financial planners use 99 to be safe.
Current monthly income
Discovery doesn’t use this figure to calculate whether you’re saving a surplus or have a shortfall. You can enter any positive figure you like – it doesn’t matter. What matters very much is the next field, your desired monthly income…
*Article originally published 6 October 2019.
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