Forget working in to your mid-60s, a thrifty group of 30-somethings are retiring, and living the good life, to the envy of their peers.
It’s a wild idea for most hard-working Aussies, possibly renting and saving hard for a down payment on a property or even saddled with a home loan. For many there may be a student loan still kicking around, possibly a car loan and some will have credit card debt; hardly ideal retirement circumstances.
A recent survey of retirement intentions by the Australian Bureau of Statistics found the average age of retirement for those who’d left the work in the previous five years was 61.4. What’s more, 13 percent of survey respondents aged 45-plus said they thought they’d never retire.
But for US-based blogger, known as “Mr Money Mustache”, retiring at age 30 – while many of his friends were still recovering from debt – became reality, and he’s now helping others follow in his path.
His advice to those entering the workforce is this: live on around $15,000 to $25,000 of take-home pay per year. Couples should be spending up to $35,000 annually, he says.
“The rest and I mean all the rest, regardless of how much you earn, goes into your early retirement fund,” he said.
He recommends making the maximum contributions into superannuation and beyond that contributing to “more low-churn growth investments that don’t generate taxable gains”.
It may be a far-fetched idea for most Australians paying off a home loan. In the first year of taking out an average sized mortgage of $300,000, a borrower will repay $19,000 – of which, around $4500 will go towards paying down the loan principal, the rest will be swallowed up by interest.
Under Mr Money’s plan, this leaves little remaining to live off.
But it can be done, he insists: “I still owned houses and reliable cars and a nice bike, and did a reasonable amount of restaurant eating and travel through the whole process.”
What separates him from his indebted thirty-something peers? He is much more careful about considering each purchase to avoid wasteful ones, and he is adamant about never borrowing for anything other than a house.
“The ultimate reward for us came with the birth of our baby boy in 2006. We had already retired from our real jobs and could share the joy and pain of parenthood together, with none of the compromised career-juggling lifestyle,” he said.
For everyone else, there are ways to reduce your living expenses and free up tens of thousands of dollars to contribute towards retirement:
- Start a budget using the Australian Securities and Investments Commission’s (ASIC) budgeting tool at MoneySmart.gov.au
- Compare financial products using a site like RateCity and refinance to more suitable options. RateCity data shows that by comparing home loans Australians could save up to $1500 each year, while comparing credit cards could free up $380.
- Plan ahead – ASIC recommends seeking financial advice about how best to get your super.