Neil (not his real name) said he was “worried sick” in retirement. He literally couldn’t sleep some nights worrying whether he and Angela had saved enough to get by. While on holiday a year earlier they’d decided to take a leap of faith that they could afford to stop work and live the rest of their lives on their savings. But now he wasn’t sure. How could he even tell?
Rather than living the dream and taking those idyllic trips around Australia, they were lying low to conserve costs. Neil mentioned all this to his accountant who promptly referred him to Jubilacion for a Safe Spending report. The accountant sat in on the meetings.
Once Neil and Angela saw a full projection of their future cashflows – taking into account their life expectancy, savings and their means-tested Age Pension, they could see that things weren’t too bad. But this type projection relies on their investments doing well and Neil knew that post-COVID markets are in a funny state and living costs were going up.
Jubilacion ran their scenario in a stochastic model (think of this as like an ‘MRI’ for your finances!) and this showed that their Safe Spending level is $63k per year. This means they can spend $63k per year and be 95% confident their money will last no matter what investment markets do, what inflation does or even if they live way past their life expectancies. Given this is coming from actuaries, Neil and Angela were able to trust that the numbers are robust. Their accountant was also delighted with how the results were presented in such a clear and understandable way. [Hint: this is all true]
Part of the reason their results were better than they’d feared is the way the Age Pension works. In scenarios where they live a long time and markets perform poorly the Age Pension kicks in to deliver more. Neil found this fascinating. He asked for a scenario without any Age Pension – just to know exactly how confident he can be.
They also asked for a scenario where they spend more on holidays for 7 years. Even a scenario where they buy a holiday house for a decade then sell it.
Neil and Angela enjoyed exploring various options for what their lifestyle could look like – with Jubilacion there to enable them to make financially informed decisions. Neil decided he plans to revisit this exercise every two years.
