Jeanette fears $700,000 nest egg will not be enough

Jeanette fears they may run out of money and asks Noel Whittaker for guidance.

Jeanette and her husband have retired with $700,000 in super, but are worried that they will run out of money. They have asked Noel Whittaker for guidance.

•••

Q. Jeanette
My husband and I are both retired. I am 61 and he is 64. We are living on an income stream. We are in a growth area. But the money is fast depleting from our income stream and I am starting to get worried we will run out of money. We have $700,000. Are we doing the right thing leaving it there?

A. In view of your ages, it is probably not wise to have your entire assets in the growth area. Certainly, growth should give you the best returns in the long term, but you need to have assets in your portfolio that will not be affected by market fluctuations.

You need to talk to a good adviser and agree on an asset allocation that suits your goals and your risk profile.

I have long recommended that retirees keep at least three years’ planned expenditure in the cash area. This should give sufficient time to handle the normal market volatility.

Do you have a question you’d like Noel to tackle? Email us at newsletters@yourlifechoices.com.au

Noel Whittaker is the author of Making Money Made Simple and numerous other books on personal finance. His advice is general in nature, and readers should seek their own professional advice before making any financial decisions.

To make the most of your money in retirement, first you need to know the rules. The PensionChecker™ tool has all the information you need.

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    COMMENTS

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    27th Feb 2019
    8:22am
    With $700,000 in super, their best strategy is to make sure they don't exceed part pension asset limits. With no pensioner concessions, and the continual attacks on low asset SFRs - particularly Labor's disgustingly unfair planned attack on SFR incomes - they will really struggle. Holding 3 year's cash means they are likely to have between $550K and $580K to invest, which at average rates would return a maximum of $29000 - nowhere near enough for a couple, so their savings will disappear in a hurry. If Bill Shitten and his mate get their way, that could reduce to barely over $20,000, depending on their investments.

    }The good news is when their savings disappear to nearly half that, they get a pension plus investment returns and concessions (though still no franking credits if Shitten's unfairness if allowed to become law - so they'll be effectively taxed at 30% on any franked dividends or barred from holding blue chip shares, just because they worked hard to save!) and at that point they should be able to avoid draining their savings rapidly.

    Really makes you wonder why the hell anyone who isn't wealthy would bother to save more than a few hundred thousand. What a STUPID system we have when the OAP is costing the nation so much, yet fools continually make life harder and harder for people who save to be self-supporting. And somehow those who don't save think taking from those they see as 'haves' is a good idea. Mind boggling!

    What astounds me most is that so many of those with nothing seem to think those who saved somehow collected money that fell from the sky, and therefore it's fair to take it back and distribute it. Yet from my observations, the majority of those with limited savings either chose to have little - manipulating the pension system by buying an expensive home, gifting, or enjoying the high life for a time - or are just not good money managers. Many who have little had far better opportunities in life than many who have lots.

    I think for some who grow up in poverty, saving becomes an obsession, because they are so afraid of poverty and determined to escape it. I know that's what drove my lifestyle decisions - which I am now being made to regret as I've become the target of envy and resentment and demands that my quite low income should be continually reduced and I should have to deplete my savings for the sole benefit of the government (whose money management skills are appallingly bad in my view - and worse when Labor is in power!).
    sunnyOz
    27th Feb 2019
    11:34am
    They are also both too young for the OAP to kick in, so until then, yes, if living on an income stream, their money would be depleting.
    almost a grey hair
    27th Feb 2019
    12:48pm
    If they had left their dosh in super still in accumulation phase instead of taking an income stream they could both be on the rock n roll until they reach pension age as a non assessed area. Once again its a matter of knowing what the rules are and staying on the lawful side of the line. PS Noel Whittaker has some great calculators at noelwhittaker.com.au
    pedro the swift
    27th Feb 2019
    11:04am
    I would love to have $700,000 to play with in retirement!
    Paddington
    27th Feb 2019
    12:09pm
    Ha ha, as many would! If you own your own home and have a car etc it sounds pretty good.
    Many are going to need to use their super to buy a house in retirement as they are not managing to get one more and more.
    Owning your own home is the big one with or without extra funds.
    Anonymous
    27th Feb 2019
    12:39pm
    Obviously you are not very financially literate or you would understand why $700,000 is NOT a lot to fund retirement. Of course it's much better, for a couple, than $850,000. Finance experts are now explaining why $500,000 can be far better than $1 million for a retiree. It's a ludicrous situation that Labor will make much worse, and unfortunately envy is driving irrational support for wrong policies.
    Anonymous
    27th Feb 2019
    12:39pm
    Obviously you are not very financially literate or you would understand why $700,000 is NOT a lot to fund retirement. Of course it's much better, for a couple, than $850,000. Finance experts are now explaining why $500,000 can be far better than $1 million for a retiree. It's a ludicrous situation that Labor will make much worse, and unfortunately envy is driving irrational support for wrong policies.
    Sundays
    27th Feb 2019
    8:03pm
    It’s been so good without your insults on this site. Paddington is correct. Owning your own home makes a big difference in retirement.

    If the money is rapidly depleting, then they need to put a budget in place. There is no reason why this money together with a part pension in a few years time won’t give them a reasonable retirement. Much better than those relying on the full OAP
    Anonymous
    27th Feb 2019
    8:12pm
    Much worse than those with a full OAP and additional income on top, Sundays. A budget doesn't help when the income is grossly inadequate - as many pensioners will attest. But keep up the communist propaganda. When the nation is destroyed completely by this stupid notion that workers and savers are for taking from and spenders and bludgers are for handing out to, you will see where Communism takes us. It's not a nice place!
    Sundays
    27th Feb 2019
    8:33pm
    Oh we are back on Franking Credits are we. You bought shares and didn’t diversify. Not too late to rectify your error. Noel Whittaker wrote a good piece in the Sunday paper. Plenty of options.

    These people in the article will be better off with their nest egg than someone without one.
    Greg
    27th Feb 2019
    11:09pm
    OGR - maybe it's YOU who is not financially literate. I don't have a problem with $700,000 for retirement. Don't need big returns either, just a few percent, plus a pension later and all is good. It's all part of a retirement plan that's typically recommended by financial planning people (so I've read).

    Depends greatly on how much you spend each week/month/year, some people struggle on $80,000 pa while others manage fine on $40,000 pa.

    That ridiculous figure put out by Challenger Financial of $1 million a few years ago was just absolute crap, marketing to get more funds into their business, and the media ran with it for a while, scaring people into thinking they'll never have enough money to retire well.
    Anonymous
    27th Feb 2019
    11:22pm
    Greg and Sundays, you have no idea what my situation is, and I don't feel obliged to disclose the issues I am struggling with, but suffice to say the fake assets test makes life very difficult for some people. Plus, expenses vary. Some people have challenging family circumstances or high health costs. There are all kinds of reasons why $700,000 may not be a lot for some people. The key point is that if you saved it, you should be entitled to benefit from it. To deprive people because they saved is WRONG, and there is no justification for it. And assumptions and generalisations are unfair and harmful.

    Yes, these people may be better off than people with no nest egg. So they should be. People who chose not to save should not expect handouts from those who did. I have no issue with the genuinely disadvantaged getting welfare. That's what it's for. I am heartily sick of the greed and selfishness that dictates that it's okay to rob savers to hand out to manipulators, bludgers and spendthrifts.
    Sundays
    28th Feb 2019
    8:46am
    The problem with you OGR is it’s always about you. Every topic. Life throws curveballs at all of us and we do the best we can to deal with it. The Pension is a right paid by taxpayers past, present and future. It is not a handout and every financial adviser will tell you that it forms part of people’s retirement strategy. I’m heartily sick of people like you who think that the
    Pension is only for the needy. No it’s not. It’s for everyone who qualifies whether they live in a cheap or expensive house, whether they are tested under the Asset or much more generous income test. If you want more, you try to save more but you don’t begrudge those who haven’t. To your mind others have more than you and it might not be ‘fair’ but life often isn’t.
    Greg
    28th Feb 2019
    6:19pm
    OGR - You say things like "Obviously you are not very financially literate or you would understand why $700,000 is NOT a lot to fund retirement."

    You say that as if it's applicable to everyone not just people who have health issues or whatever to struggle with. I would say most people would have enough with $700,000 at retirement. Then you go on AGAIN about your situation that you are struggling with.

    Yes some people get it good, some get it bad, some people inherit a massive sum, some people get nothing, some people have extremely poor health, some die young (50/60), others live into their 90's- it can be a cruel world unfortunately but it's NOT all about you.

    I know this franking credits policy is going to hurt you apparently but, hey, that's the chance you take when investing in shares, isn't that correct?

    I don't have shares, I'm not willing to risk my money particularly in these times when the world is rolling in debt just waiting for the next "big one" to come along and, like a house of cards, collapse in a heap. I don't have the 10/20 years to wait for the market to recover. I could have funds in shares, I would have been much better off at this stage but I realised a few years ago that was being greedy, I decided that lower risk, lower returns at this stage was the way to go.
    Jannie
    27th Mar 2019
    11:08am
    Me too Pedro

    27th Feb 2019
    11:21am
    Still $140k under the part pension cut-off

    If you can't live on an income from that and part pension now, you're certainly in trouble as you spend down
    Your problem is your budgeting and lifestyle. Need to learn to live a bit more frugal
    sunnyOz
    27th Feb 2019
    11:37am
    Did you read the story? - They are too young to be getting the pension.. Still a few years off yet.
    Anonymous
    27th Feb 2019
    12:10pm
    Well then they shouldn’t have retired eh
    Work till you saved a bit more
    Old Geezer
    27th Feb 2019
    12:35pm
    I retired with a lot less 30 years ago and so glad I did as I am so much better off today then if I stayed in the workforce.
    Anonymous
    27th Feb 2019
    12:45pm
    Congratulations, OG - and nicer to hear, but not everyone can become a financial wizard in old age. The current system is unfair to those who worked hard and saved well but don't have financial savvy and don't want to spend their retirement learning! And a recent Royal Commission exposed that we can't rely on advisers - so a lot of retirees who saved well are suffering very unfairly.

    Lothario, they may not have a choice about retiring. We were forced to retire well before OAP qualifying age. When you work in a dangerous or unhealthy job, lose health-wise in the birth lottery, or suffer childhood neglect or abuse that results in ongoing health problems, it may not be possible to work to OAP age. And unfortunately it's likely to be lower income earners, often, who encounter these problems. They experience the additional problem that they aren't financially savvy due to poor education. Overall, the system is heavily rigged against those who work hard to acquire modest savings.
    Sundays
    27th Feb 2019
    8:06pm
    Lothario, finally something we agree on. It always amazes me when people retire without financial advice and then decide that their lump sum is not eneough. There is nothing in this article to say it was a forced retirement.
    thommo
    27th Feb 2019
    8:16pm
    to Old Geeser...you must be living on toilet paper/.
    wheels
    27th Feb 2019
    11:37am
    We've been retired 10 and four years so together, say four years. I'm in Australian super. I am an active manager and I don't leave it in growth areas if its dropping but you have to have an interest to follow it. I was caught for 2 days only in the 3 month drop last year. Two days....and I did lose a bit in those two days out of previous profits. But making it up now even though I'm only in Stable and fixed interest. So drops like that and unexpected large expenses hurt and is hard to make up. But last year my super fund earned just on 12%. So , I am on a part pension,all tax free and am currently out of Private health cover. The biggest hurt was that last six months and cutting trees down. If you can avoid bad drops you can maintain $700-750000. Otherwise I think that riding it down and then up costs you living expenses which you won't replace easily. As you draw down ,as one writer said ....you gradually get more pension and end up with near $400k assets and the full pension.
    Old Geezer
    27th Feb 2019
    12:33pm
    You are probably better off not trying to beat the market in such a fund.
    Rosret
    27th Feb 2019
    12:45pm
    I would love a crystal ball. Anything that requires more than day to day living is becoming unbelievably expensive.
    Need a dentist, a repair man, or your pet minded. Need a new phone because it only lasts 2 years. Need a new computer because it only last 4 years. Would you like a holiday?

    Step outside basic living and money seems to have no value.
    Old Geezer
    27th Feb 2019
    1:29pm
    Get rid of the pet then no pet minding. My phone just needed a new $9 battery and is as good as new. I use a tablet instead of a computer that costs about $200 which does what a $2000 computer does. Go to the dentist every 6 months as prevention is better than trying to fix neglect.
    Anonymous
    27th Feb 2019
    2:23pm
    But you live in utopia, OG. My phone batteries cost $40+. I use a tablet also, but it's not a replacement for my computer. Certainly a $200 tablet is NOT a computer. As for dentists, harm done in childhood causes problems in old age and check ups do not help.
    cupoftea
    27th Feb 2019
    2:06pm
    I was in growth in the last crash and like other people lost a lot I left in growth till it got to a certain amount then changed it to conservative I also keep a account of what I spend daily for the years 15/16,16/17,17/18 18/19 I add a percentage for CPI so when I retire I know what live is going to cost me
    cupoftea
    27th Feb 2019
    2:06pm
    I was in growth in the last crash and like other people lost a lot I left in growth till it got to a certain amount then changed it to conservative I also keep a account of what I spend daily for the years 15/16,16/17,17/18 18/19 I add a percentage for CPI so when I retire I know what live is going to cost me
    Chris B T
    27th Feb 2019
    3:02pm
    I don't and struggle to understand your problem.
    Drawing $70K/year it will take 10 years to deplete without earning Interest.
    This would put both of you Past OAP eligibility age.
    The place where you are receiving the income Stream From would be giving you some Interest at least.
    No one mention the amount you are Drawing Down per year?
    If it is FAST moving down at a guess it would be $100k/year.
    Poor Me I would be worried if I can't Manage on that amount.
    Anonymous
    27th Feb 2019
    8:16pm
    Some rather wild assumptions there, Chris BT! It's entirely possible it's moving down due to share values falling. It's happening, you know! How do you know their investments haven't failed?

    People who worked hard and sacrificed to save didn't do so to live on the OAP with nothing extra, nor to have to run out their savings BEFORE they reach the age of needing extra medical and personal care. I'm guessing you haven't saved anywhere near that sum? Maybe envy is tainting your perspective?
    Chris B T
    28th Feb 2019
    11:06am
    What assumptions.
    Simple fact $700k = $70k x 10 which equals 10 years and you have done nothing.
    Like wise $700 = $100k x 7 which equals 7 years and guess what you have done nothing.
    If you choose to use a method less than this, is beyond belief.
    The other Factor Here Which is Left out, there other assets.
    Would that be making so Called Assumptions.
    Poor Me and my Assumptions about This BS.
    Greg
    28th Feb 2019
    6:28pm
    See OGR relying on shares is not always the best option - like you said values are dropping so they could be drawing $50,000 and values drop $50,000, $100,000 gone in one year, now they have a lesser amount for the share market to work it's magic on, much safer in my mind, at my age to keep funds in more secure investments so the only downward movements are from drawings.

    And why are they "wild assumptions", nothing wild about them, extremely conservative figures presented by Chris.
    Mizpah
    27th Feb 2019
    3:33pm
    Hi … I'm hoping someone on this thread OGR, Lothario et al could offer an opinion. I am 62 (age Pension due 66.5 ) my lovely wife is 57. Freehold house 600K Super 600k Other Assets 80 K . Both on OAP when I am 72 . Trying to put in place a realistic ,legal strategy that would allow me to step down from work. Wife Intensive Care RN + myself Long term Paramedic.
    Can any forum member push me in the right direction or advise a strategy that deals with age difference. Thanks
    Anonymous
    27th Feb 2019
    4:06pm
    Mate that's another 10 years you're looking before you say you will go on OAP. Keep adding to your super in balanced or moderate growth, and invest other savings you have in the share market.
    If youre not confident of doing it yourself , then seek financial advice.

    You can always make post tax contributions to super as well,

    If youre going to work another 10 years, chances are you will exceed the asset threshold, - and can afford to live it up a little before and after you retire
    Anonymous
    27th Feb 2019
    4:15pm
    Transferring a lot of your super to your wife might allow you to access the OAP if you retire before she reaches OAP qualifying age, as her accumulation mode super won't be counted in the assets test (unless the laws change, which is likely!)
    Mizpah
    27th Feb 2019
    4:12pm
    Thanks Lothario for your comments . I will be OAP age in 4 years … 10 years when we are both eligible. Most strategies Scott Pape etc. require that you are both OAP ( when I am 72).
    Just to clarify. Thanks again Enjoy all comments on these threads.
    Aviator
    4th Mar 2019
    1:31am
    That's ok Mizpah, glad to have been of help.I feel Bill Shorten has our best interests at heart.
    Karl Marx
    4th Mar 2019
    1:44am
    always live within your means. for some people $2 mill isn't enough & for others $200k is more than adequate.
    Make life simple, enjoy the simple things in life & all will be good
    Happy retirement
    fairdry
    27th Feb 2019
    8:17pm
    My rough calculations for a homeowner couple with 700k is that if they could live on 55k getting 5% in super pension drawdown till OAP. This would leave them with approx. 450k left at age 67. Assets tested OAP would be approx. 28K per year and the compulsory minimum 5% super pension draw down would be approx 23k. That is a good standard of living.
    Sundays
    27th Feb 2019
    8:36pm
    Yes it is, and those suggesting otherwise haven’t done their sums.
    Anonymous
    27th Feb 2019
    8:50pm
    No it’s not
    Depends on the lifestyle you’re used to
    I tried that for a year - lived on $50k
    That’s a basic standard for a single person who has had a high income all their lives

    $100k is comfortable for me but that’s because of my prior lifestyle, so this couple would need around $100k if they want a lifestyle reasonably close to their pre retirement lifestyle

    Keep working guys and don’t let Shorten stuff up your retirement
    Greg
    27th Feb 2019
    11:24pm
    fairday - You're correct in what you're saying.

    Lothario - $100,000, bloody hell, THAT'S why you're a Lib supporter, makes sense. You have no idea how the other half lives do you. I'd struggle to spend $100,000 every year.

    My wife and I are very happy, built new home recently, bought nice car to last us 20 years maybe and travel to visit family 6 times a year, 700 kms away - and we have only been spending $40,000 pa, that includes one of the highest council rates in the country ($3,500).
    Anonymous
    27th Feb 2019
    11:29pm
    It also depends on your health needs, personal and family circumstances, and what constitutes assets. Remember, fairdry, that $700,000 I Centrelink assessed assets is NOT the same as $700,000 to invest. It's recommended that you keep 3 years' cash, and certainly you need adequate cash to not have to sell assets in a downturn. All these assumptions do is play into the hands of a stinking greedy government and the bureaucracies and 'advisory groups' that are destroying the nation with their ridiculous notions that people who have saved should be robbed to hand out to people who didn't.

    I have always lived on very little until now, but a sudden shocking change in our family situation and mine and my partner's health issues have pushed our costs very high. We have to travel long distances to shopping and medical facilities, so motor vehicle costs are high. Council rates in our area are shocking, and just keep climbing.

    These insulters who rant about people not doing their sums or not managing investments well are just ignorant and self-serving, and disgustingly arrogant and lacking in empathy.
    Anonymous
    27th Feb 2019
    11:35pm
    Lucky you, Greg. I'll bet you don't support 4 teenage orphan grandchildren for up to 14 weeks a year. You probably don't have expensive dietary requirements. You might not have to drive long distances to facilities. You might not have health issues that impose very high costs.

    A few years ago, I would have considered $40K a year a luxury. Circumstances vary.
    Anonymous
    27th Feb 2019
    11:35pm
    Lucky you, Greg. I'll bet you don't support 4 teenage orphan grandchildren for up to 14 weeks a year. You probably don't have expensive dietary requirements. You might not have to drive long distances to facilities. You might not have health issues that impose very high costs.

    A few years ago, I would have considered $40K a year a luxury. Circumstances vary.
    ex PS
    4th Mar 2019
    10:18am
    Good to see an old rusted on admit that the pension is not enough to live comfortably on. Must raise the pension to over $50 k.
    fairdry
    27th Feb 2019
    9:05pm
    Hi Lothario, If they boosted there drawdown to 45k & Pension for 10 years 67 to 77 that would leave them an approx. income 70+k for a while. There won't be much left if they were to make the age of 90. Unsure how they live. If they have a high standard of living like yourself, they are in trouble.
    Anonymous
    27th Feb 2019
    11:31pm
    Fairdry, they might have elected to save well in order to afford high quality aged care. They might need personal care and home help due to health challenges. We don't know what they needs are, and the judgments here are really quite nasty. Perhaps they don't have a high standard of living at all, but have heavy expenses due to circumstances?
    Boldage
    28th Feb 2019
    4:23pm
    An option for Jeanette and her husband is to consider their health and longevity. The benefit of retiring when you are still healthy enough to be able to enjoy travel and family is to spend on what you have saved money for. As pointed out by a number of people who have commented is that $55K for a couple is a comfortable income and can be achieved in a number of different ways. The median income for an individual from employment is that amount after tax and the person would have to pay a mortgage on that amount of income.
    ex PS
    1st Mar 2019
    9:53am
    How long is a piece of string? Is $700 K enough, what is your life style, in a good Super Fund that should get you $40 K to $60 K a year in a low to medium risk environment.
    Having the house paid off and no debts to speak of we are doing quite well on the earnings off one $260 K Super fund and 150 K invested otherwise, we have $400 K in a Super Fund that has not been touched yet. Maybe we are doing well because we have our money in Industry Funds, our Accountant says we live frugally, we wouldn't have known if he hadn't told us.
    Used to manage an overseas trip every two years but haven't done that for a while, not because of funding.
    We live the way we want to, not the way others tell us how we should live.
    patti
    3rd Mar 2019
    10:02am
    $700,000! I can only dream.....my nest egg is $7000, and Age Pension income. I have to manage. There is nothing else. No family to help. But I consider myself relatively well off, as I own my home and don't have to pay rent. Mind you, it would have been nice to have something similar to a rent allowance, while I was still paying a mortgage. They were very tough times.
    Abby
    3rd Mar 2019
    1:30pm
    They will be in trouble if labour get in next election.
    ex PS
    4th Mar 2019
    10:24am
    I will probably never qualify for a government pension, I do not see this as a bad thing, it means that I really don't need it.
    In order to make my money last I am depending on the next government to be more socially responsible than the last. In other words to look after the majority of Australians and not concentrate on protecting Banks and Big Business and outdated power generating technology at our expense.

    4th Mar 2019
    7:53am
    $700'000 is pretty adequate if half of it is hidden someplace nobody can find it. All in the open one might as well spend $300'000 of it till age 67 and then get the pension (maybe part pension). Difficult to do, hiding the stuff!
    ex PS
    4th Mar 2019
    10:13am
    Only problem is, you hide it under the bed, you actually lose money every year it is out of the system.

    I prefer to pay my tax, invest in a good Super Fund and only take from my fellow tax payers what I am entitled to. I have done this for 50 years and have done fine so far. Probably won't see any pension money, but it is there if I need it and at the moment I am answerable to no one as to how I spend what I have.

    I shake my head when I see people trying to hide money, give it away and waste it, just so they can get money they are not entitled to. Their choice of course, but a lot of effort for so little gain in most cases.
    KB
    4th Mar 2019
    11:48am
    I agree with older and wiser. Health care can be expensive as you become older.They are probably looking ahead
    KB
    4th Mar 2019
    11:48am
    I agree with older and wiser. Health care can be expensive as you become older.They are probably looking ahead