You don’t need $1 million for a successful retirement

Scott Pape: you don’t need $1 million for a successful retirement.

scott pape

Scott Pape has had to deal with his own life-defining moment and, as a result, he's keen to help people tackle their financial hang-ups.

Scott, your story is inspiring, but did you ever think that rebuilding your life and home would be too difficult?

When the fire came through that day in February 2014, everything was lost – our house was burned to the ground and nothing was retrieved. My wife was incredibly emotional – we had our baby son who wasn’t yet one and we were safe, but her wedding dress, our photos, particularly those of her dad who had died the year before – all gone. We didn't even have a change of nappy for our son, but we were safe.

Such an experience is naturally life-changing but has it actually made you view things differently?

Not really. We’re taught to believe that the more money you have and the more stuff you accumulate the better. But in reality, you just want to be safe and secure and look after your family – that’s certainly all I’ve ever wanted.

In your book, you refer to the Don Bradman Retirement Strategy – and this will intrigue many – so why Don Bradman?

I use the Don Bradman analogy, ‘Strap your pads on. Grab your bat. It’s time to take a swing at the biggest fear people have’, to simplify the premise of how you can live well in retirement even if you don't have millions in super. There are so many awesome people who are aged 50 or above: teachers, policemen, factory workers, who might be divorced and don't have a lot of money in super. They think they’re right royally screwed and don't want to see a financial planner as they think they don't have enough money.

If you own your home, you can live a very comfortable life with $250,000. The strategy outlines a clear and simple picture to explain that everything will be okay for the average person.

Only one per cent of the population will have $1 million in super when they retire, so 99 per cent won’t.

$1 million is often quoted as the minimum amount needed for retirement – I guess you don't agree?

The $1 million figure quoted as being needed in retirement is just bullshit. Most people have a hazy idea of what retirement is. It’s not about making as much money as you can and then just sitting back and doing nothing for the rest of your life. I couldn’t think of anything worse than doing nothing; it’s unhealthy. People who struggle the most in retirement are those who have worked all their life and have no social contacts. One or two days of work per week is actually quite a reasonable way to live in retirement.

Psychologists report that the magic figure when it comes to income is $70,000, anything over that won't make you any happier. Generally, older men in their 60s believe that having one or two million in the bank means they’re sorted. So they think they’ll quit their job and have fun, but the reality is often that once they’ve done the big trip, they come back and are more miserable than when they were at work.

You quote $250,000 as being enough if you fully own your home. How important is it to own your home in retirement?

No one will ever say you’ve got too much money in retirement, but a major factor in having enough is to own your own home – if you don’t, then you really don't have the security.

If you wake up in your 50s and realise that retirement is upon you and you don't own your home, then funding retirement will be difficult, unless you have access to a large income.

So, what do you do if you don’t own a home?

There are things you can still do, and one of the most important is to get rid of your debt. Basically, you’re not ready to retire if you still have debt. Australia’s household debt is one of the highest in the world.

People have a lot of comfort in fully owning their home and there’s often an emotional reason for holding on to it. If you have your own home but are in debt, then you might want to think about downsizing and clearing as much of what you owe as you can.

When trying to get your finances in order, don’t do 100 things. Do a few and do them well.

Financial planners get a bad rap, so do people need to look past the headlines?

There are a lot of doom and gloom newsletters that are just there to scare people with their headlines – ‘if you don't have $1 million in super then you’ve got no chance of a successful retirement’– that kind of thing. This is just designed to agitate, to get you to read their newsletter or, in many instances, to pay for a subscription so you can find out how to ‘fix’ your situation.

People typically don't want to see a financial planner because they think they’re too expensive or they don't trust them, especially bank financial planners.

There are options if you don't want to see a financial planner. Centrelink’s Financial Information Services officers (FISO) are the real unsung heroes of the financial world and more people should use them.

FISOs are truly independent and can offer help with aged care, Age Pension, and access to free resources to help you manage your money.

When it comes to super, it’s worth hopping onto the Moneysmart website and using its calculator to work out the best option for you. The difference between being charged one per cent and 0.02 per cent in fees is vast.

Too many people are also being sold SMSFs (Self Managed Super Funds), but the reality is that they’re difficult to manage and really are a pain in the arse. Industry super funds are a no-brainer really – they offer the lowest fees, often have higher returns, and you can also buy shares if you choose.

What tips would you give to someone planning their retirement?

1. Reframe your understanding of what retirement will be – consider transitioning to retirement – many of the happiest retirees all work in some shape or form.

2. Prepare for retirement by keeping yourself really busy and active.

3. When it comes to the financial planning and services industry, no one cares about your money more than you do. Go and see some of those offering free information before you sign up – teach yourself what you need to know, and save yourself money.

Is there one lesson from your experience that’s surprised you?

This is the reason I decided to write the book. It’s as much about making you think of the important things in life as it is about planning your finances. Losing my house taught me money doesn’t make you happier and that the greatest shortcut to happiness is having enough set aside for emergencies.

I wrote the book like a father talking to his son at the bar, telling him ‘here’s what you have to do’. What I really want is for the book to be accessible to everyone in the family – for one person to read it and pass it on to their parents, children, single parents, those who really need help understanding the value of taking control of their finances. I want it to give people hope and the understanding they’re not the only ones struggling to get to grips with their financial future.

Scott Pape has been voted ‘Australia’s most trusted finance expert’ and his book, The Barefoot Investor: The only money guide you’ll ever need, is now on sale. RRP: $29.94, with 10 per cent of the royalties going to not-for-profit counselling service, Financial Counselling Australia.



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    30th Mar 2017
    Hi. Interesting article. What would be the figure required (suggested) for a couple? Thanks
    1st Apr 2017
    Annie2320 - There are so many variables that it is impossible give an answer to your query without some specific details of your expectations. A good start is to figure out what income you require in retirement, at what age you want to retire, and how long you want your super/savings to last. I realise that you can't know when you and your partner will take your celestial journey but for this purpose you need to make a judgement. Having decided upon the foregoing you can plug the figures into the MoneySmart Retirement Planner and play around with the amount in Super and other savings to find the result you are after.

    The ASFA estimate that an income of around $47000 is required to fund a "median" retirement and $59600 to fund a "comfortable" retirement for a couple who own their home. (I think we live a comfortable retirement at well under $59600 a year). According to the Retirement Planner for a couple retiring at age 66 with their Super/savings running out at age 90 $340000 is required to fund a median retirement and $940000 to fund a comfortable retirement. This is based on super/savings returning 4.2%. However, the investment and administration fees that are used as the default fees by the Retirement Planner are way higher than is offered by most Industry Funds. Using the fees charged by my fund then $315000 and $835000 would be required for a median and comfortable retirement respectively.

    There are all sorts if variables that you can play around with in the Retirement Planner that can have a significant effect on the results, e.g. investment return, age your super/savings run out, rate of increase from year to year (the Planner assumes an increase in quality of living over and above inflation).

    I hope the foregoing helps.
    30th Mar 2017
    We own our own home. We have each other so we do not feel the need to go out. I have mobility issues anyway! We are managing on the pension without huge amounts of savings. I look for ways to save all the time. Keeping on top of bills is the key. Thousands a year can be saved by reviewing all bills like insurance and electricity every year at least. $70,000 is not needed for retirement. It is not like you have to dress for work or fill the car with petrol every week. Budgeting is important and knowing what everything costs and buying specials keeps you managing well.
    30th Mar 2017
    GrandmaKathleen22 the figure you mention maybe for retirees who want to travel and do other things
    30th Mar 2017
    GrandmaKathleen22 the figure you mention maybe for retirees who want to travel and do other things
    The pom
    30th Mar 2017
    I agree that a million is not required to retire if you managed your funds correctly. My wife and myself both started almost from scratch in our fifties after our first marriages went bad. I had nothing and my wife had almost nothing apart from a recently purchased house still only at the start of the mortgage. Financial advisors I have spoken to in the past would have had me broke by now whereas I am living comfortably. I found the secret was buying good quality blue chip shares when they are a sensible price and hanging on to good shares, get rid of anything not performing well in the long term. We are now well into our 80s and can happily live worry free with a good share portfolio and some cash. The cash is only there because I don't seem to be able to spend all our income and can't be bothered working out which shares to buy
    30th Mar 2017
    The ASFA index says that you need almost $60,000 to have a comfortable retirement if you own your own home. Do people begrudge that retirees have this? Yes I know we will hear from all the people that happily do it for less, the point is that we all differ. Possibly Scott could give us his assumptions and tell us how to dodge medical bills, replace white goods that wear out, replace gutters and paint the house, buy a replacement car or go further than the local shops. Another expert who knows nothing.
    30th Mar 2017
    In his book, Scott talks about living on a combination of super and part pension for a comfortable lifestyle and saving 10% of income for Rainy day. The rub was planning ahead, paying off the mortgage and having 3 years expenses in the bank. Not always achievable for many and neither is working 1-2 days a week.
    30th Mar 2017
    Yes well there's always the nay-sayers Sundays. Always 'reasons' why it won't work for them! And most of them won't make a single step towards helping themselves.
    30th Mar 2017
    Too true KSS. Many people suffer illness and other setbacks not under their control. However, friends used to say to us that they didn't know what we did with our money. Saving some for retirement! Now they say how lucky we are. Many were better earners than us!
    30th Mar 2017
    Scott hit on the nail. Anyway you cannot take possessions with you when we depart this earth. Better to have good memories with family and friends. If you are on a pension then youy-ou learn to budget and still be able to enjoy life
    30th Mar 2017
    First of all, check out your electricity & gas bills. Do you receive any discounts? If not, what are you waiting for? Get onto your supplier and ask for them. I get 18% discount on my electricity just for paying it on time. One of the companies that supply my region are offering around 35% discount for electricity and 20% for gas.

    I've done a budget of all my expenses, and pre-pay my phone & electricity bills so that I don't have 'bill shock' when they come in and have to find the money for then. It's like 'forced' savings, yet how many banks will give you a 18% discount on your credit card bill? My insurances are also paid fortnightly.

    I can even put around $150 per fortnight into my savings - for car & registration expenses. Then when I've paid for these, then the rest is just pure savings.

    I will let you know that I live in a New South Wales Rural City of around 80,000 and don't pay exorbitant rents like in the big cities. The big cities creep me out with all the busyness. Won't ever live there again.

    I own my car and household goods - that's enough for me.
    30th Mar 2017
    Actually SuziJ banks WILL give you a discount and up to up to 100% and for as long as two years! That's on the money the banks charge you (the interest) for giving you the money to pay those discounted bills. You cannot expect banks to give you a discount on the money you spent somewhere else. That would be like saying the electricity company should give you a discount on your rates bill! Nice idea but 'ain't gonna happen'!
    30th Mar 2017
    It sounds like you are practical and a good saver and budgetter, SuziJ, but be aware that pay-as-you-go payments like fortnightly insurance payments often cost more than a lump sum annual payment. Yes, the upfront annual payment does affect your cash flow, but I see it as buying in bulk - it's only worth it if you have enough of a buffer (savings).

    Another great money saver (again, presuming you have spare cash in a savings account), is to automatically pay your credit card by direct debit, the day it is due. I haven't had to pay any credit card interest in decades and I've spent heaps, with the convenience of paying by credit card. Of course, you have to have a card with an interest-free period which will have a higher % rate, but who cares if the rate is higher if you never have to pay it?

    Also, beware electricity and gas bill "discounts". More often than not, you are simply paying more if you don't pay your bill on time, receive paper bills via the Post, pay by direct debit, etc. The so-called "discounts" are actually the standard charges.
    They are all very difficult to compare to other utility supplier's charges and are designed to be thus.
    I learnt the hard way after being overcharged by Energy Australia for over two years. I qualified for all the discounts but was duped on the "off peak 1" and "off peak 2" rates, which had been charged in error, after I replaced the hot water system. So what did they do? They re-issued all the bills with the different rates but didn't change the bill totals (which were all in credit anyway, as I had paid them all). Also, the dates differed, so you had to be a mathematical genius with time up your sleeve to have any chance of knowing what they were doing. After an almighty effort and literally days on the phone, I finally received a refund of over $300, but only after I threatened to go to the Energy Ombudsman.
    Advice for anyone having a hassle with energy or phone bills: Ask to speak to a Supervisor the first time you ring. If "they are unavailable" or "can they ring you back?" (they never do) or you get cut off after waiting on hold, threaten to go straight to the Ombudsman. You might just save yourself from a nervous breakdown.
    Old Geezer
    30th Mar 2017
    Watch those electricity and gas discounts. A big percentage off does not always mean a cheaper bill. You need to download their fact sheets and work out your bills to find the cheapest one. I compared 3 companies one gave 5% off, one 10% off and one 15% off. They all worked out the same total bill.
    30th Mar 2017
    The chapter on retirement income in Scott's book is worth the book price by itself. We downsized by selling our house last year, bought a 3 bed unit, paid off the small mortgage and added $300K to existing investments, still working part time at 75. We bare as comfortable financially now as we have ever been. Thankyou Scott
    Nan Norma
    30th Mar 2017
    Sold your house and now pay rates and body corporate fees. How does that save you money.
    Nan Norma
    30th Mar 2017
    Sold your house and now pay rates and body corporate fees. How does that save you money.
    30th Mar 2017
    Agree with Tinker re all the expenses mentioned (whitegoods, cars, our homes etc dont last forever without repair/replacement/maintenance & insuances are all so difficult to manage even when working with a half decent income!.
    When Scott says $70,000, does he mean annually (as in the $70,000 income from investments/bank interest/casual work/Centrelink combined?) Or does he mean $70,000 total amount in super, receiving/earning like $7000pa in interest? I don't see how I'd be able to survive on the interest from this amount of super (assuming my super earns around 6% pa -this would go nowhere in todays greedy world. I'm 55 so would be taxed heavily for biting into my super anyway & according to govt I am nowhere near old enough to receive any sort of govt assistance/pension unfortunately..
    This article is not at all reassuring, probably more validating that one probably does need $1m super nest egg (esp if retiring before 60yr old) !
    1st Apr 2017
    Cheezil61 - Scott is merely making the point that beyond a certain level of income any additional income doesn't make a person any happier and psychologists set this at $70000 annually.

    I reckon he has a valid point. For some there is never enough while others live happily with just enough to live on. Often it is a matter of attitude rather than dollars.
    30th Mar 2017
    Oh & downsizing isn't always possible as an option -esp when your current 4br house is only valued around $250k & smaller house/units/apartments in your town are selling for around the same money or dearer than the one you already own!
    Nan Norma
    30th Mar 2017
    And units have body-cooperate fees to pay.
    31st Mar 2017
    Oh & not to mention the Real Estate Agent's commission
    30th Mar 2017
    I have rarely read so much tosh! How old is this guy, has he retired yet? His formula may fine if you don't want $3,000 pa private health insurance or otherwise are prepared to wait 3 months to see a health specialist 3-12 months to get a public hospital bed or can guarantee good health until you die; don't live in a regional centre where you need to travel to Sydney or other capitals to see specialists and stay in city hotels while they treat you; don't want to travel overseas or live a few dreams; don't wish to participate in your choice of past-times unless its bingo or visiting the public library; don't want the occasional meal out and are happy to let your house deteriorate and drive a bomb. We worked very hard to enjoy a carefree retirement, paid a lot of tax so that others could go on the dole, become single parents or retire at our expense and also enjoyed our life while working but we had little time for idle expenditure and now spend around 50% more in retirement, much of it on health and travel, to what we spent while working. With the way government policy is moving on pensions and health, anyone who doesn't financially prepare for their own retirement is going to find that their later years are pretty miserable.
    31st Mar 2017
    REad the book. You would be able to afford those things by following the plan he sets out.
    30th Mar 2017
    "The $1 million figure quoted as being needed in retirement is just bullshit."

    Really? And then this guy goes on to say that the magic figure retirees need is $70,000?
    Where did this person come from?
    Many people have considerably more than $70,000 and are doing it tough. $1 million @ 3% returns you $30,000 pa and the ATO may then want a part of that too. This level of income is LESS than the pension.

    Give us a break Debbie. People struggling in retirement with a government trying to destitute them whilst painting them out to be millionaires do not need this sort of BS. You would be aware that other countries pay a pension to their citizens and Australia is all but alone in the developed world for having retirees turned into targets whilst the rich are crying poor and demanding tax cuts. Obscene.

    My wife and I planned to be self funded decades ago. We get by with strict budgeting, smart decisions and self denial on the pittance we earn and this allows us to be free of government handouts and allows us an overseas trip every year. Owning one's home is course the key to being able to survive.
    Old Geezer
    30th Mar 2017
    MIck you are meant to spend your $1m dollars as well as the interest in retirement. $1m divided by 30 will give you $33,000 a year.
    31st Mar 2017
    Why would you save a million dollars to end up with an equivalent of the OAP you can have for spending the million having fun while young?
    2nd Apr 2017
    That's the stupidity of saying people are meant to spend their capital. All that does is put you at risk of future hardship and deny you the pleasure of spending on a good life when you are younger. Those who lived it up are looked after by the taxpayer. Those who saved are crucified by mean and miserable Scrooges and forced to give up what they saved for.

    OG, if you spend $33,000 a year, your interest income falls every year, and with inflation your required drawing increase and before you know it, you are just like those who didn't save = putting you hand out for a pension. The idiotic pension system we have creates a welfare mentality by making it beneficial to spend and disadvantageous to save. DUMB!
    30th Mar 2017
    id say if you had $100,000 in the bank and owned your own home ,you would be ok ,dont forget intrest rates will start rising soon,this is as low as they will ever be ,6 or 7 %would be enough to pay all your bills ,assuming you have the pensioner card.
    utilities car reg ,rates ,phone bill/ internet ,sat intrest rate s were 6.5% thats $6500 a year ,that would cover all those bills,and whats the single pension ,some thing like $440 per week,you couldnt eat that much food if you tried .
    31st Mar 2017
    I think those figures are a bit off gadsby
    For example below are ours basic costs before food, entertainment etc:-

    Vehicle registration $900
    Insurance $1200
    Vehicle servicing appox $1000
    House insurance $2500
    Excess water $500
    Rates $2500
    Electricity 2000
    Mobiles (2). $1200

    We actually have more expenses than that - But I used the above basics for an example. (health insur, Internet)

    And $100,000 at present time would only give tiny interest maybe 2.5% giving $2,500 or $48.00 a week
    Can't see interest rates increasing to 6.6 % for a long long time.

    So expenses above are $11,800
    So unfortunately the sums quoted in the above thread are way off !
    31st Mar 2017
    Well i dont know where you live Cindy
    my car reg is $400
    comp insurance $700
    rates $1200
    power $800
    water $600
    cell and internet +foxtel about aprox $1400.
    as i said you need the pension card ,and yes the intrest rate are only running about 2.5 at the mo ,but the only way is uup
    1st Apr 2017
    I'm truly glad gadsby that your expenses are moderate - Unfortunately mine are not (dont have pension card). I'm relieved when my power bill is under 500/quarter, rates are actually a little higher than tabled, car rego NSW so am slugged...

    My point was that it can be expensive, especially in big cities, road tolls, fees for this and that - I've economised where we can, shop at Aldi, don't eat out at restaurants except if special occasion, don't have coffees out (I think this is dead set crazy) -

    I have to disagree re interest rates - cant see them going up much in the next few years - while I'd like higher % for my term deposit I'm actually hoping they stay low to help families etc. with mortgages.
    It would be a disaster for many people if these rates increased.
    1st Apr 2017
    Yes you realy need to get the pension card Cindylou ,im in Victoria ,so maybe different here.
    Re interest rate a lot of self funded retirees are doing it tough with these low rates ,and their working lives are over ,so they just go out and find a job,whereas the younger one have their whole working life ahead of them ,
    I remember when intrest rate s were 17% so it wasnt all beer and skittles for us .

    anyway try to get the pension card and maybe you can have those coffees .
    1st Apr 2017
    Absolutely right gadsby re the 17% interest rates, they were horrible...I remember getting letters from the bank frequently advising of the increases. When we moved to our current home 26 years ago I think interest was 14% which we thought was good - it then went down gradually which naturally was great for us.

    If interest rates move higher and I'm not talking all that much higher, many, many families - people will be in dire trouble. So I suppose for that reason is can't see increases in relation to home loans going past perhaps 6-7% worse case scenario. Younger folk have no idea how tough loans were years ago.

    Hubby and I are self funded retirees - glad we don't have to engage with the centrelink circus.
    1st Apr 2017
    If you haven't read the book go and get it now. It is simple, easy to understand and straight forward. I have put what Scott says into practice and it's working really well for me. My son in law let me read his copy, then I bought my own copy plus 2 more to give to my adult children and their other halves.
    almost a grey hair
    15th Apr 2018
    Yes I believe if you stay on top of it all you will put yourself in a much better position than someone who just sits back and whines about things.
    Check out and use his calculators especially the deeming calc to work out what Centrelink deems you to be earning, then find out how much pension you will get, then use the drawdown calc to find out how long it will last. Then manipulate your position accordingly, you don't need your super to last till you are 120, 85 will do .Then spend what you have ,why leave it for someone else, after all they will only spend it LOL
    Liverpool Anne
    1st Apr 2017
    I was/am a single mother, I worked hard at a middle income job, and paid off my house and put off holiday to get my daughter educated and through Uni. Fortunately in those days, Uni was free, no Hex. She is now a health professional. Because of the prior stuff. I only was able to afford Super for 14 years which yielded me just over $100,000. I have sufficient super for the next 8 years, by which time I will be 85, then it will be the pension only. I worked out my expenses for year, including health fund, and I increase that all by 4% each year and put that away. I was going gangbusters until one of my dogs got diabetes. I bit of tightening and we are just okay. I have done more travelling with a friend, since I retired and I consider myself to be very fortunate. Healthy, happy and content. What else could you ask of life. be happy and laugh a lot, there is someone somewhere worse off than youself
    4th Apr 2017
    Well said Liverpool Anne.

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