Did you know that in the first three years of your retirement you will spend a quarter of a million dollars? It’s true. On average, this is what people tend to spend – and we’re not talking about a champagne and caviar and private jet lifestyle, either.
Usually, we see people needing around $70 – $80,000 each year to live on in their retirement. Three years goes by quite fast. If you retired in July / August of 2019, you would already have spent a quarter of a million by now (September 2022).
This is a lot of money. And bear in mind that three years is only about one tenth of your retirement time on average.
Of course, in their first couple of years of retirement, people do other things too, like go on a big holiday, buy a new car, fix up their house or buy a caravan – so often the total spend is actually a lot more than a quarter of a million.
It’s a lot of money in a short amount of time. And the trouble is that many want their money ‘in a safe place’ as soon as they retire. They are talking about term deposits here (ie cash in the bank) – but this couldn’t be further from safe.
Why? Because money in term deposits doesn’t grow. So it isn’t providing you any safety at all. On top of that, things get more expensive each year due to inflation. The money in your super should be growing and compounding instead to provide you with enough to live off. Unless you have $4 million in super, you should keep your money invested in the biggest companies of the world rather than sitting in a term deposit doing nothing.
The problem people see with this is that it’s risky. But here’s the thing: there’s a big difference between risk and volatility. In March 2020, the value of super dropped by 37% but then grew to new high. This is an example of volatility – not risk. Risk is a drop that never recovers – a permanent loss.
If your savings are in cash only – that money is not getting dressed and going to work for you. It’s just sitting on the couch watching tv and eating snacks.
You’ve worked hard to put money into your super – now it’s your money’s turn to work and grow for you.
