Budget and Super, page-4

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    I see two major problems with living on one's retirement nest egg and living well. Let's consider the mythical $1million under discussion. It earns $50,000 if managing 5% return.

    There are two major factors affecting the perceived value of $1 million today and that is, in 15-20 years time that amount will be, in fact, of far less value because of the eroding effect of inflation and secondly, the increase in life style which has become apparent and built-in to wages of workers, but not into the sum of $1 million. It needs to grow. If the 5% is the only return on the $1million and is drawn down to live on, then you can't expect to be able to retire and live for another 20 or more years in the same way you want, while you are working. Few people at 80 plus want to travel every year, keep driving cars (many can't do that safely), drink copiously, and lie down on annual flights. When you retire, your clothing bill is less as you are now dressing for the office and casual clothes are just fine for most of the week, with a few for good wear and glamour. You don't drive your car as much either. For me it was a no-brainer. Did I want to trade-off a few additional years as a younger retiree with possibly a smaller nest egg, or continue in a stressful job? Total no-brainer. Never regretted my decision at all. However, teachers today now earn an additional 50% over and above my retirement salary. That is the power of BOTH INFLATION and HIGHER STANDARD OF LIVING. You need to ensure that $1million is growing each year so you can't spent it all. Hence, the need to be in the share market, imho, live off the dividends and keep up by growth in the share price. Dividends in successful companies keep growing as well.
 
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