There is a lot of media hype now over the amount you need in super to retire – and I am a bit over it. And talk of increasing the retirement age to 70 is a little depressing. Currently, most people can access their super when they are 60, and age pension around 66 increasing to 67.
The reality is that superannuation or retirement savings is only one aspect to your financial independence, other things such as owing your own home, your human capital and other assets outside of super can all work together to create a lifestyle for you that doesn’t have you turning up at a desk at 8.30am Monday through Friday.
Take your family home for example with the explosion of AirBnB you can rent out some or all of your home for a period of time and earn some extra dollars, and some clever folks are even earning money from helping others with their AirBnB’s building side hustles, property managing several properties for others.
Go a step further, and that caravan that is sitting down the side of your house, can also be hired out. There are websites such as www.camptoo.com and www.camplify.com.au where you can list your caravan, motorhome, campervan etc for hire We recently picked up a motorhome from a lovely man in North Fitzroy, and cruised around for a week, in his fully decked out motorhome. I asked him how he found hiring it out – his answer “brilliant – we were going to put the van in storage for six months but discovered camptoo and instead have been able to generate some decent money”. Brian’s motorhome rents for approximately 20-30% less than your mainstream van hire companies – it’s a win win!
So, you have human capital which is your ability to work and earn an income, and you have financial capital which is what you have accumulated by using your number one asset, your ability to earn an income,
The goal has always been to reach the point where our financial capital covers all of our needs, and we don’t need the human capital anymore. That’s what we call financial independence, “I don’t need to work to get paid anymore.” But it’s still your choice about whether or not to harvest your human capital and turn it into additional dollars—and you can.
You can continue to “work in retirement.” That’s why I’m a huge fan the label of “financial independence” and not “retirement” because in reality what often happens is most people when they first retire, have some time off and then they realise they are kind of bored and they go back into some sort of work – and now work looks completely different for them. It may only be on a part time basis or in totally different role to what they were doing previously. I have a client who is a retired engineer who is having a ball working in a wine bar, mixing his two loves wine and chatting, no, he is not earning the same dollars but it’s an extra $20,000 per year he doesn’t need to draw from his super, and he is super happy!
When you consider that you can earn around $20,000 without paying any tax, and if you are over 60 any income you are drawing from super is tax free, with a little bit of planning now, you may be closer to financial independence that you think! So I encourage you to think outside the square and look at things a little differently 😊
Michele Purvis is an advisor with over 30 years experience working in the accounting and financial services industry helping clients to define and create their wealth.