[ADVISOR VIEW] Marius Fenwick from thisiswealthup assists with determining how much capital or wealth you need to accumulate by retirement ... Moneyweb Retirement
I often get asked: “How much is enough, and how much do I need the day I retire”? Well, that all depends on how much monthly income you will require in retirement and how much you want your loved ones to inherit the day you pass on.
Considering the above, your retirement income should be at least 20% lower than your pre-retirement income requirement. If you have a bond and car debt up to retirement age and settle it shortly before retirement and you scale down on your property, your retirement income requirement can be as much as 50% lower than your pre-retirement income requirement. You will also be able to assess this by considering the amount of free reserves you have available at month end currently.
To calculate future required capital, we must work with assumptions. There are no guarantees that the figures are going to work out exactly, but if realistic expectations are created, and realistic assumptions are used, one should get pretty close to the ball bark. If my guideline in terms of where you should be is followed, you should be okay when you retire. It is also important to remember that it is a work in progress and an “alive” model.
Far too often we find a scenario where individuals rely on the value of their primary residence to supplement future income on the basis that the primary residence will be sold and a smaller property will be acquired at the appropriate time. Considering the selling costs, capital gains tax and purchasing costs of the new property, the profits are often insignificant.
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