How much will I need to fund the next stage of my life?

05 June 2019

Denise Harrison, Wealth Adviser |

As clients come within 10 years of retirement, we tend to see their focus (and tension) increase when it comes to how their investments are performing and the level of income it has generated. This view is not unusual, nor surprising given the culmination of life decisions centred on retirement. It can be uncomfortable to move from a regular earned income and associated feeling of financial control, to the uncertainty of relying on investments to provide a primary income.

Knowing your spending habits is vital

More often than not, people do not have a clear idea of how much they are spending to live and play. While it is possible to total up regular bills, we do not always include the full picture or know of those one-off larger expenditures (e.g. weddings, a new car, holiday, renovations, helping a family member) actually happen every year. On the other hand, we do see some clients who love a spreadsheet and have this area covered.

It is difficult to paint an accurate picture of how your assets can support your needs if you do not know what you are spending when you stop working. Tracking your expenses is not as difficult as you might imagine, there are a number of great apps available, or you could use the old fashion method and rely on your bank or credit card statements to determine annual spending.

Once you know what you are spending, you need to consider how it will look over time as you age. Will your spending increase or decrease in the future? How will your spending be supported by your assets (super, shares, property, etc.)? Will your assets generate enough income, or will you be eating into your capital over time? Will your capital last your lifetime?

Checking how you are tracking can reinforce confidence and knowing the answers to the above questions puts you back in control, allowing you to take the necessary steps to re-evaluate your spending, or sit back in the comfort you have sufficient income for your needs.

Your future spending could be less than you think it will be

Our experience with clients over the past 30 years suggests that spending decreases as you age. There is an expectation that medical costs will increase, and this can be true to some extent, but with decreases in other costs (like travel and transport), the overall impact we see is a decline in spending. Research from the Grattan Institute in Australia and from Milliman Group , one of the world’s largest actuarial firms, supports this. Both reflect a far more positive outlook on funding lifestyle post work due to using realistic spending patterns. For many of us we need only look to elderly parents to see the spending decline first hand.

Our discussions with clients are often around increasing spending levels during their younger years to maximise choice and lifestyle during active and healthy years. It is difficult to spend big at 90 so understanding spending patterns and what capital you need allows you to enjoy life now while still providing for the twilight years.

Choices mean different things to people, perhaps it’s upgrading to travel first class or taking more family trips (with children and grandchildren), buying that sports car you’ve always wanted, helping with education for grandchildren, or gifting wealth while you are here to see your children enjoy it.

Our role is to help you see what is possible so you can make choices that maximise your current and future lifestyle and enjoy what matters most to you.

If you are not sure how you are tracking or if you are ready to move comfortably into the next lifestyle phase, please contact a BDO Private Wealth Adviser to discuss your options.


The information in this document reflects our understanding of existing legislation, proposed legislation, rulings, etc., as at the date of issue. In some cases, the information has been provided to us by third parties. While it is believed the information is accurate and reliable, this is not guaranteed in any way. The information is not, nor is it intended to be, comprehensive or a substitute for professional advice on specific circumstances.
The financial product advice or information in this document is of general nature only and has not taken into account the investment objectives, financial situation or particular needs of any particular person. Before making an investment decision on the basis of the advice above, a prospective investor needs to consider, with or without the assistance of a professional adviser, whether the advice is appropriate in the light of their particular investment needs, objectives and financial circumstances.