For years, $100,000 was the “magic” number for annual retirement spending. However, after several years of higher-than-average inflation, $120,000 is now a more realistic figure.
To fund that level of spending from age 60 to age 90, a household needs around $2.1 million in investment assets by age 60, measured in today’s dollars. A perpetual portfolio, designed to fund that spending indefinitely without drawing down capital, requires just over $3 million.
Many articles focus on how much super you need to achieve this. However, many people also own investments outside super, including with gearing such as property, so looking at super alone does not give them the full picture.
I wanted to develop a simple way for people to estimate whether they are on track to achieve their retirement goals, considering both their existing investments and how much they expect to invest between now and retirement.
Why your super balance alone may not be enough
Superannuation balance benchmarks are widely published and easy to find. They tell you how much you should have in super at ages 30, 40 and 50 to retire on a given income. However, these benchmarks have two limitations.
Firstly, how you invest outside super can significantly influence your financial position at retirement. Borrowing to invest in quality assets can magnify investment returns over several decades.
For example, someone in their 30s might own a substantial residential property portfolio but have relatively little equity. If those properties grow at a compound rate of 6-7% p.a., they could be in a very strong financial position in 20 to 30 years. Their current super balance would tell you very little about that potential.
Secondly, they assume you plan to keep working until you can access super at age 60. Many investors would like the option to retire earlier, whether that means stopping work altogether or reducing their working hours. Super-only benchmarks do not tell you whether you are accumulating enough investments outside super to fund that choice.
Most people we speak to want to answer two simple questions: am I on track, and if not, what should I do to get back on track? Answering those questions requires a broader approach that considers all their investments and future contributions, rather than super alone.
How much do you need to fund $120,000 a year in retirement?
The amount you need to retire depends on whether you want to preserve your capital or gradually spend it.
A perpetual portfolio is designed to fund your spending indefinitely while preserving the purchasing power of your capital. You draw only the real return, which is the investment return above inflation, leaving the capital to form part of your estate. On this basis, a household spending $120,000 p.a. needs a little over $3,000,000 in investment assets in today’s dollars at age 60.
A depleting portfolio is designed to be gradually spent down to zero by a specified age. I have used age 90. This approach requires materially less capital because your investments only need to fund a defined retirement period. To fund the same annual spending, a household needs approximately $2,120,000 if they retire at 60, or $2,290,000 if they retire at 55.
| Scenario | Net investment assets required |
| Perpetual portfolio, any retirement age | $3,010,000 |
| Retire at 60, capital exhausted at 90 | $2,120,000 |
| Retire at 55, capital exhausted at 90 | $2,290,000 |
All figures are in today’s dollars, for a couple, net of loans and net of tax.
Why preserving your capital raises the retirement target by 42%
The perpetual target is 42% higher than the target for someone retiring at 60 and spending their capital by age 90. That additional capital is the cost of never needing to worry about running out of money and gives you greater probability of leaving an inheritance or making gifts during your lifetime.
The difference comes down to how each portfolio funds your spending. A perpetual portfolio distributes only its real return, preserving the purchasing power of the capital. I have assumed a real return of 4.15% p.a. This is 3.5% income plus 4% capital growth, reduced by tax equal to 3% of the total investment return in the retirement phase, then adjusted for 3% inflation. A depleting portfolio distributes its real return plus a portion of capital each year. Over a 30-year retirement, spending that capital makes a substantial difference to how much you need initially.
However, the depleting approach leaves less margin for error or unforeseen events. If you live to 95, you may run out of money. Poor investment returns early in retirement could also exhaust your portfolio sooner than expected. This sequencing risk is particularly significant in the years immediately after you stop working, when withdrawals can compound the impact of investment losses.
Life expectancy is another uncertainty. If you are in your 30s today, estimating how long your retirement savings need to last is difficult, particularly given potential advances in healthcare and technology.
My view is that, wherever possible, most people should aim for the perpetual figure and treat the depleting figure as a minimum rather than the goal.
The other interesting observation is that retiring early requires less additional capital than many people expect. Retiring at 55 rather than 60 increases the depleting target by only 8%. However, you also have 5 fewer years to accumulate that necessary capital. How you structure your investments is critical: you need enough liquid investments outside super to fund the years before you can access it.
Our assumptions: returns, inflation and tax
Every projection in this blog relies on the following assumptions.
- Ungeared investments earn 3.5% p.a. in income and 4% p.a. in capital growth, giving a total return of 7.5% p.a.
- Contributions increase with inflation each year. The amount you use is this year’s contribution, and it grows at 3% p.a. thereafter.
- Property values grow by 6% p.a. – it is assumed that the investor will use employment income to continue to cover any holding costs
- Inflation averages 3% p.a., and all figures are expressed in today’s dollars.
- Super investment income is taxed at 15%, with capital growth assumed to remain unrealised until pension phase. Investment income outside super is taxed at 47%.
- An effective capital gains tax rate of 30% applies to assets held outside super.
- Contributions are made evenly throughout the year, and retirement withdrawals occur at the beginning of each year.
All table figures are rounded to the nearest $10,000, so your total will be approximate.
Two assumptions warrant further explanation because they can make the projections more conservative.
Firstly, I have assumed all capital gains are realised when you retire – to be able to calculate “net worth after all tax”. This ignores the potential benefit of deferring capital gains tax over the following 30 years.
Secondly, I have used your current investment property loan balance as a proxy for the property’s cost base when calculating capital gains tax. Where your loan balance is below the actual cost base, this overstates the estimated tax payable.
These assumptions tend to understate your projected financial position and therefore overstate how much you need to accumulate. I would rather these estimates suggest you are slightly behind than give you false confidence that you are on track.
Will your investments fund your retirement? Use 6 tables
I have tried to make this calculation as simple as possible. Work out how many years you have until your intended retirement age, find the relevant figure in each of the 6 tables below, then add those figures together. Compare the total with your retirement target above. If you want to spend more than $120,000 in retirement, I’ll tell you how to adjust the target balance below.
Every table gives you an after-tax figure expressed in today’s dollars, so you can add the results directly. For retirement at age 60, the tables estimate:
- The first two tables: how much after-tax wealth your geared property investments will accumulate by age 60.
- The next two tables: the after-tax wealth of your investments outside super, excluding property. These account for both existing investments, such as ETFs, and the amounts you plan to invest each year.
- The final two tables: your family’s projected super balance, including the effect of future contributions.
The tables use set increments. If your circumstances fall between two values, estimate a result between them. For example, if you are halfway between two increments, use the midpoint of the two figures.
Tables 1 & 2: investment property wealth
Start with the current market value of any investment property, before deducting any debt. The first table shows its projected value after capital gains tax, expressed in today’s dollars.
Next, use the second table to calculate the amount to deduct for your current debt. This accounts for inflation and the capital gains tax adjustment that arises because the model uses your loan balance as a proxy for the property’s cost base.
These calculations assume your investment loan remains interest-only, with the balance unchanged until retirement. It shows the impact of inflation gradually reducing the debt in today’s dollars, while the property is assumed to increase in value.
Tables 3 & 4: shares and ETF wealth
These tables cover shares and ETFs held in your own name without borrowings. The figures are after tax, allowing for investment income to be taxed annually at the top marginal rate and capital gains tax when the investments are sold.
Use Table 3 to estimate the after-tax value of your existing investments at age 60.
Table 3 assumes your investments have no material accrued capital gain today, so it only allows for tax on future growth. If you already have a material gain, look up Table 3 as normal using your full portfolio value, then subtract 30% of that existing gain from the figure the table gives you. For example, if your portfolio is worth $400,000 and $100,000 of that is an unrealised gain, look up $400,000 in Table 3, then reduce the answer by $30,000.
Use Table 4 to estimate the additional wealth you will accumulate, after tax, by investing each year between now and age 60, for example, in an ETF portfolio.
Tables 5 & 6: your family’s superannuation
Use your combined household super balance. No capital gains tax is deducted at retirement. This assumes each person can transfer their projected balance into pension phase within their available transfer balance cap, with any capital gains realised once the assets are supporting that pension.
Use your total annual contributions before the assumed 15% contributions tax, including employer contributions. The $60,000 row represents a couple contributing $30,000 each per year.
The comparison between Tables 4 and 6 illustrates the long-term benefit of super’s tax concessions. Under these assumptions, contributing $1 of pre-tax income to super in the first year and increasing that annual contribution by 3% each year produces $46.76 of retirement capital after 30 years, measured in today’s dollars. Taking those same increasing amounts as salary, paying 47% income tax and investing the remainder personally produces $21.43.
Super produces approximately 2.18 times as much retirement capital, and the advantage increases the longer you invest.
Table 7: retiring before 60?
If you intend to retire before 60, reaching your overall retirement target is only part of the equation. You also need enough investments outside super to fund your spending until you can access it.
A household spending $120,000 p.a. and retiring at 55 needs approximately $554,000 outside super when they stop working. This is less than five years of spending because the remaining balance continues to earn investment returns as it is drawn down.
Where you hold your wealth matters. For example, a household with $2.8 million exceeds the depleting portfolio target for retirement at 55. However, if $2.65 million is held in super, they have only $150,000 available outside it. That falls well short of the $554,000 needed to fund those first five years.
A worked example of a couple retiring at 60
A couple, both aged 40, plan to retire at 60, giving them 20 years to accumulate wealth. They have a combined super balance of $400,000 and contribute $60,000 p.a. between them. They also hold $150,000 in ETFs and invest a further $20,000 p.a. They own no investment property.
| Source | Table | Result |
| ETF balance of $150,000 | Table 3 | $225,000 |
| ETF contributions of $20,000 p.a. | Table 4 | $480,000 |
| Super balance of $400,000 | Table 5 | $855,000 |
| Super contributions of $60,000 p.a. | Table 6 | $1,500,000 |
| Projected net investment assets at 60 | (rounded) | $3,060,000 |
Using the tables, their projected retirement assets total $3,060,000 after tax, expressed in today’s dollars. That puts them approximately $940,000 ahead of the depleting target of $2,120,000, and approximately $50,000 above the perpetual target of $3,010,000.
This gives them a useful indication of where they stand. Under these assumptions, they are on track to fund spending of $120,000 p.a. indefinitely while preserving their capital. However, the margin is only 1.7%, which is well within the error of any 20-year projection. I would treat that as being on track rather than comfortably ahead.
A worked example with mostly property
Consider a couple, both aged 35, who theoretically own $4 million of investment property with $4 million of debt. They have no equity in their properties and a combined super balance of just $100,000.
Assume they make no further super contributions, keep their investment loans interest-only and can fund any shortfall between rental income and property holding costs for the next 20 years.
Using the tables, their projected financial position at age 55 is:
| Source | Table | Result |
| Property gross value of $4 million | Table 1 | $4,970,000 |
| Debt of $4 million | Table 2 | ($1,550,000) |
| Super balance of $100,000 | Table 5 | $210,000 |
| Projected net investment assets at 55 | $3,630,000 |
These figures are after tax and expressed in today’s dollars. Under the model’s assumptions, the couple would exceed the $3,010,000 perpetual portfolio target, despite starting with no property equity and relatively little super. They would still need a plan to sell property, repay debt and make sufficient funds available to meet their retirement spending.
Because they intend to retire at 55, they also need to clear the Table 7 test. Their property equity sits entirely outside super, so the $554,000 required to bridge the years to 60 is comfortably covered, although it would require selling at least one property.
This illustrates why your current super balance, or even your current net worth, may tell you relatively little about your retirement prospects. When you borrow to invest, capital growth applies to the full value of the asset, while the loan balance remains unchanged. Over several decades, that can build substantial equity, provided you can afford to hold the investments, and they perform well.
It also shows why building wealth does not necessarily require 5 or 6 investment properties. One or two sufficiently valuable, high-quality properties, supplemented by super and perhaps ETFs, is often enough. What matters is the wealth those investments can produce relative to your retirement spending, rather than the number of properties you own.
How to adjust if you want to spend more
Your retirement target increases or decreases in direct proportion to your spending. Divide your intended annual spending by $120,000, then multiply each target by that figure.
For example, spending $160,000 a year is one-third more than $120,000, so you need one-third more capital. The same adjustment applies to both the depleting and perpetual targets.
What if you are materially behind your target?
In my book, Wealth by Design, I present the wealth equation: Investable surplus × investment return & efficiency × time
Investable surplus is how much you invest each year. Investment return & efficiency is the quantum of return you retain after tax, fees and investment mistakes. Time is how long you give those contributions and returns to accumulate.
These three inputs multiply each other. Investing more gives your returns a larger base to work on. Improving your after-tax returns helps each contribution grow further. Starting earlier gives you more years to contribute and allows those contributions longer to compound.
This explains why being behind at 40 is a very different problem from being behind at 55.
With 20 years or more remaining, you have considerable scope to improve your position. Consider the first couple in the example above but assume they retain their existing ETF portfolio and make no further contributions to it. Their projected assets fall to $2,580,000, which leaves them $430,000 short of the perpetual target. Table 4 shows that investing $20,000 p.a. outside super over those 20 years accumulates approximately $480,000 in today’s dollars. Under these assumptions, that single decision is what carries them from a portfolio that eventually runs out to one that does not.
With only 10 years remaining, the same annual investment produces approximately $220,000. Starting earlier gives them twice as many years of contributions, as well as more time for investment returns to accumulate.
As retirement approaches, closing a substantial gap requires larger changes. Many households cannot simply double their annual investments in their final decade of work. Improving tax efficiency and reducing unnecessary costs can help, but probably only at the margin.
That leaves time. Working longer allows you to make additional contributions and gives your existing investments more time to grow before withdrawals begin. If you are planning to spend your capital by a specified age, it also shortens the retirement period you need to fund. For these reasons, delaying retirement can be one of the most effective options when you are behind.
Return to the first couple, retaining their existing ETF portfolio but making no further contributions to it. Retiring at 60 gives them projected assets of $2,580,000, which exceeds the amount needed to fund spending of $120,000 p.a. until age 90, but falls short of the perpetual target.
Working another three years lifts their projected assets to $3,040,000, just above the perpetual target of $3,010,000. Under the model’s assumptions, those additional years close the gap, although the margin above the target is small.
This is worth noting. The same couple has two routes to the same destination: invest $20,000 p.a. for 20 years or work three more years. Both close a $430,000 gap. That is the wealth equation at work, with investable surplus and time acting as substitutes for one another.
Of course, working longer has a personal cost, and it is not possible for everyone. Other options include spending less in retirement or accepting that you will gradually draw down capital. You can also combine these approaches. Working a little longer and spending a little less may be more achievable than relying entirely on either change.
What I would avoid is trying to force the numbers to work by taking substantially more investment risk. Higher risk may increase expected returns, but it also increases the potential for losses when you have less time to recover.
Similarly, borrowing to invest within five years of retirement can leave little time to recover from a poor result if you need to sell the investment when you stop working. It requires a sound investment and cashflow strategy beyond simply hoping to catch up.
Ahead of your retirement target?
Being well ahead of your retirement target is more common than many people expect, particularly among long-term property investors. It raises a question worth considering: what do you want to do with that financial freedom?
If your projected position comfortably exceeds the perpetual target, you may have the option to retire earlier, spend more, reduce investment risk or use some of your wealth to help family or support causes you care about, which I discussed here earlier this year.
The limitations of this exercise
These figures provide a useful guide, but there are three limitations to keep in mind.
Firstly, the results depend heavily on the return assumptions. Reducing the assumed real return from 4.15% to 3.5% increases the perpetual target from $3,010,000 to approximately $3,550,000. Small changes in long-term returns can make a substantial difference to how much capital you need, and nobody knows those returns in advance.
Secondly, the model assumes consistent returns each year. Actual investment returns vary, and their timing matters. Poor returns in the years leading up to retirement or immediately afterwards can materially affect your position, even if your average return over the full investment period meets expectations.
Thirdly, your circumstances will change. An inheritance, business sale, relationship breakdown, illness or change in tax law could significantly alter your financial position. These tables cannot account for every possibility.
Used properly, this exercise helps you assess whether your existing investments and planned contributions are likely to fund the retirement you want, or whether you need to make changes.
That is valuable information at 35, when you have considerable time to respond. It is equally valuable at 55, although the options available and the changes required may be different.
Your current balance is only the starting point. What matters is where your investments and future contributions are likely to take you.
Of course, this is a general guide and does not replace professional financial advice tailored to your circumstances.
Many thanks for this fantastic resource! I think on the podcast you mentioned a table 8?
Hi Dave, sorry about that – missed it – its now in there.
Hi Stuart, this is a fantastic blog post! There are no other retirement contents out there that take into account both super and outside of super investable assets to work out the numbers. The assumptions you used here can easily be coded to build a useful calculator. Is this something you’re thinking of doing?
Hi Richo, yes, I will do this soon. In fact, I’m building a resource website with a bunch of downloadable content for the podcast. 👍
A calculator would be a great idea. Plug in your own numbers and spit out the scenarios. Please consider this suggestion Stuart.
Yep, Rob – working on it. 👍 ETA by end of this month (as I’m on leave for a couple of weeks)
Hey Stuart, this is a great article, thank you!
Have you included the cost of selling the investment properties?
Would be great if you could develop a spreadsheet for this or even better an online html calculator 🙂
Hi Saro, Yes, since writing this blog, I’ve actually come up with the idea to build a resource website with a lot of downloadable content for podcast listeners. This is nearly finished, and I’ll probably launch that at the end of this month. I’ll convert this into a calculator/model.
Echo the other comments in complimenting you on pulling this together. Very helpful resource and easy to follow. Makes me think in particular about the trade off between investmenting over multiple years compared to working longer. Would you have any additional thoughts for a couple in a similar situation to your first example but where early years childcare costs feel like generating an investable surplus is quite tricky!
Thanks for the kind words, David. I really appreciate the feedback.
You raise a very good point. It would be useful to have a model that weighed up the opportunity cost of investing less during those expensive early years with young kids.
For example, if you don’t invest much for the next 5 or 10 years, how many extra years might you ultimately need to work? Conversely, if you knuckle down and save and invest as much as possible for a decade, how much sooner could you potentially retire or reach financial independence?
Of course, there’s a balance to strike. You don’t want to make life unnecessarily difficult during a stage when childcare and other family costs are high. But understanding the long-term trade-off would help people make that decision more consciously.
I’ll see if I can work on something like this. Thanks for the suggestion.
Stuart is the most realistic person Ive ever followed. Everyone else is trying to sell something or trying to justify ‘just property or shares.’
Awesome work mate.
Thanks a lot, Troy. I really appreciate the feedback.
Keep following along. I plan to keep improving the podcast/blog and increasing the value it delivers each year.
Hi Stuart,
Thanks for the great podcast episode and excellent blog resource. One thing I didn’t hear mentioned through out is the aged pension – just wanted to see if that had been factored in at all or not for your calculations or would it just be a bit of extra headroom on a depleting portfolio.
Thanks, Joseph. Virtually all of my content is written for people who are, or are aiming to become, self-funded retirees. As a result, the age pension wasn’t factored into these calculations.
I also have relatively limited experience with investment strategies that specifically incorporate Social Security benefits, including optimising eligibility for the age pension, so I wouldn’t want to overstate my expertise in that area.
Hi Stuart, I’ve been reading and listening to your content for many years. I think this is one of the most useful, practical and easy-to-use resources that you’ve ever put together. Especially with the addition of the last two tables. Great work Stuart and thanks for willingly sharing your knowledge, without an agenda to push, other than wanting to help as many people as possible. Well done!
Wow! Thanks very much, John. I really appreciate the feedback.
I’m pleased you found it useful. The aim was to make it as practical and easy to apply as possible, so people can get a clearer sense of where they stand and what they might need to do next.
Thanks also for following my content for so many years. Comments like this make the effort worthwhile. 🙏
Hi Stuart, this is such an excellent resource it’s very practical and works as a good guide. Thanks for the podcast and blogs they have been helpful as we pursue FIRE. My husband & I enjoy listening to them. I read Investopoly and Rules for the Lending Game a few years back both were very helpful. We have our Wealth By Design now looking forward to reading your pearls of wisdom. Keep up the good work you do. I see an Order of Australia coming your way for services to the community with regards to financial education.
Thank you so much. That is extraordinarily generous feedback, and I really appreciate you taking the time to write it.
I’m very glad the podcasts, blogs and books have been helpful to you both, and hopefully to many others too. That’s ultimately why I keep creating and sharing the content. Thanks again for your very kind words, and I hope you enjoy Wealth by Design. Please share with anyone you think might benefit.
Hi Stuart
It’s very nice blog & podcast.I really appreciate if you add table/modelling With geared properties outside super & inside SMSF at 60% & 80% LVR
Thank you in advance.
Thanks Rutvij, I appreciate the feedback and suggestion.
I’m currently building a resource website where podcast listeners will be able to download useful tools and content, and the plan is to eventually turn this particular blog into a financial model people can use. I’ll certainly consider including gearing inside super. I think it could be useful, but I’m also conscious of keeping the model as simple, usable, and understandable as possible. But, inevitably, it won’t be able to cover every scenario.
Hey Stuart, great podcast over the retirement topic. May I know where can I download the spreadsheet? Could not find the link to it.
Thanks Richard. I haven’t made the spreadsheet available yet. I’m currently building a resource page for podcast listeners and plan to launch it towards the end of October. The retirement spreadsheet/model will be available there once it goes live.
Hi Stuart, if you have ETFs that are purchased 100% using borrowed funds can you apply the figures in the Investment Property tables to make a comparative calculation?
Thanks!
Hi Daniel, yes, broadly speaking, that should work, provided you’re investing in a high-growth ETF portfolio.
Hi Stuart, this is an amazing episode and blog post! It definitely addresses the gap of calculators in the public realm only focussing on super projections. Thank you for your continuing to share your insights with listeners and audiences – it is greatly appreciated!
I have a question on Table 5 – what is the % growth assumption? Is it 4.15% p.a. due to the 3.5% income plus 4% capital growth, reduced by 3% tax and then adjusted for 3% inflation or is this something else? Using a conservative 8% capital growth rate of super on a $500,000 balance yields an outcome of ~$730,000 after 5 years. What is driving the variance between $730,000 vs $600,000 in the modelled Table 5 amount?
Looking forward to the resource pages when you get that up. Please keep up the good content!
The 4.15% figure you have quoted is the return assumption for the retirement phase, not the accumulation phase. They are different, because super is taxed differently before and after you retire.
Table 5 uses a nominal return of 6.975% p.a. That is 3.5% income plus 4% capital growth, less 15% tax on the income component only. Capital growth is left untaxed in accumulation, on the assumption it is realised once the balance has moved into pension phase.
There are then two reasons your figure differs from mine.
Firstly, the return assumption. I have used 7.5% gross rather than 8%, and deducted earnings tax. On $500,000 over five years, 6.975% produces approximately $700,000 in nominal terms.
Secondly, and this is the larger effect, every figure in the tables is expressed in today’s dollars. That $700,000 is discounted at 3% inflation, which brings it back to approximately $604,000, shown as $600,000 after rounding.
Your $730,000 is a nominal figure, so it is not directly comparable. Discounting it for inflation on the same basis gives approximately $634,000, which is close to my $600,000. The remaining difference is the return assumption and the 15% earnings tax.
I have presented everything in today’s dollars deliberately. A retirement target expressed in future dollars is difficult to interpret, because you cannot easily judge whether $5 million in 25 years is a lot or a little. Expressing both the target and the projection in today’s purchasing power makes the comparison meaningful.
Hi Stuart, thanks so much for providing this invaluable resource to the community – they have been a huge help for us in the last few years.
It is very difficult to find unbiased, asset class agnostic financial information that incorporates the family home (as well as lending strategies). This holistic view is worth its’ weight in gold, and you have really raised the bar here by adding a time element to the equation.
We are currently looking at transferring my wife’s super to a WRAP product based on your blog from a few months ago, this advice alone will save us tens of thousands of dollars in fees in the coming years.
Really appreciate all the work you put into this, and thank you for providing all this information for free to the community. Such valuable advice will allow me to forgive your anti-Bitcoin stance.
Keep up the great work!
Cheers
Dave
Hi Dave,
Thank you very much for your kind words and we’re glad to hear that you’re getting value from our blog/podcast. More power to you! Thanks.
Hi Stuart,
Thanks for this post, podcast and the tables. They are very useful and a point of difference to other content out there. I agree with the other comments that turning the above into a calculating resource would be amazing.
An associated question. If you were planning on targeting a perpetual portfolio, perhaps that is more income orientated and less growth orientated (for example 4.5% income, 3% growth) then would the need to calculate the capital gain on the existing portfolio and deducting this, not be required? The thought being that if the portfolio is not being drawn down then capital gains impact can be deferred perpetually? (or until death and then transferred to beneficiaries) In this model the growth target would be to still be to match inflation but be more income focussed.
Thanks,
Hi Tony, thanks for the kind words. A calculator is on its way, and I plan to launch it on a new resource website towards the end of October.
You’re right in principle. If you only ever spend the income from a perpetual portfolio, you never need to sell, so capital gains tax can be deferred indefinitely. In that case, deducting 30% of your existing gain overstates the impact. That’s one reason I described the tables as conservative.
A few caveats though. Deferral isn’t elimination: death generally isn’t a CGT event, but your beneficiaries inherit your cost base and pay the tax when they sell. Also, it’s hard to never sell anything over 30 years, as rebalancing and large one-off expenses will trigger some gains. Finally, outside super, an income-focused portfolio pays more tax each year than a growth-focused one with the same total return, because income is taxed annually while growth can be deferred.
So if you’re confident you’ll hold your portfolio indefinitely, it’s reasonable to skip that deduction, or deduct a smaller amount as a buffer.
Hi Stuart,
Great stuff. Thanks for all your hard work to educate the masses. Apologies if I didn’t see it here, but don’t you have to consider that you have fully paid off your mortgage and own your PPOR outright in this calculation?
Thanks
Hi Rob,
Yes, that is correct; the retirement calculations assume that you own your home outright (no mortgage) and you don’t need to fund rent or mortgage repayments. In our opinion, for our clients, that is a stable and good retirement plan.
Hi Stuart – thanks for another very informative podcast episode – always appreciate the obvious effort you put into these
When I was listening I wanted to “comment” that the model assuming consistent returns each year is a pretty huge caveat, and one that (along with the potentially very large impact of changes to inflation and returns expectations) would cause me to limit my faith in the results – so potentially directionally good but …
So on the topic of retirement calculators and modelling/projection tools – and for those others interested in access to online tools like these – having looked at the many dozens of available calculators I’ve found (e.g. from various Australian Super Funds, government (e.g. MoneySmart), the many FI calculators, various Guardrails calculators, commercial tools (Boldin, ProjectionLab, etc) and so on) most were either extremely US centric or way too simplistic – probably the best of the Australian variants was the Supercalcs Mercer Retirement Income Simulator but it’s pretty simple and limited in my opinion
Long story short given the dearth of useful tools that actually included features I wanted (for pre and post retirement) I wrote my own web app (still adding and updating :)) to use for our own planning with support for things like:
Australian-specific modelling — Superannuation (accumulation/pension phases, 15% earnings tax, TBC, CC’s), Div 296, CGT reform, Age Pension means-testing (assets/income tests, deeming), outside super assets, family trust and individual taxation with minimum tax floor
Three projection engines — Flat Linear (deterministic – what Stuart has used), Monte Carlo (traditional or regime-based with optional fat-tail hybrid), Historical (143 years of Australian and International market data 1883–2025 (equities, bonds, cash, cpi, etc) + block bootstrap option)
Multiple withdrawal strategies — 7 dynamic strategies (RBG, Guyton-Klinger, CWR, Vanguard, VPW, ABW, NestEggly) + static “Spending Smile” with smooth phase transitions, all with real-time guardrail visualisation (Balance + Guardrails chart, Income Experience chart)
Sensitivity analysis (14 points across returns/spending/inflation/SoRR respecting current projection mode), Monte Carlo success probability, maximum sustainable spend solver, historical rolling analysis, sequence-of-returns-risk stress testing, asset allocation frontier
Ongoing retirement check-ins — Monthly/yearly roll-forward with elapsed time tracking, model-vs-actual variance reports, on-track/off-track verdict card with dual historical/MC sustainable spend benchmarks, assumption drift detection, full history log with restore/export/import
Calendar-year aware — Plan start year/month, DOB-based ages, financial year anchoring for tax law changes, calendar-year chart axes, Now-line + past shading on all timeline charts
PDF export — report (charts as high-res images, tables as selectable text, inputs appendix, sensitivity/stress tables, guardrail levels, full projection data)
Save/Load Scenario
and dozens of other features – it all runs completely standalone in the local browser and all data is stored locally
I know someone else who faced the exact same dilemma and also wrote a fully functional web app, but they have also published their work for free online at https://retireconfident.com.au/ – like my tool theirs runs completely locally – there are features in theirs not in mine and some in mine not in theirs but a lot of overlap – I can’t vouch for the veracity or reliability of their work but from what I can tell it’s easily the best Australian localised tool I’ve seen available online so far – and it’s free to use
Thanks so much for the kind words, and for such a detailed comment. You’ve clearly put serious time into this.
You’re right that assuming the same return every year is a big simplification. We chose it on purpose. The article aims to be a quick, clear way for readers to see roughly where they stand, so you can check every number against the tables. Some of the assumptions are deliberately conservative, like taxing income outside super at the top marginal rate. I’d rather someone come away thinking they’re slightly behind than feeling falsely confident.
I also agree that a flat return model can’t show sequencing risk. That’s why the article points out that poor returns in the years just after you stop working can do a lot of damage, even if long-term averages hold. It’s also why I recommend aiming for the perpetual figure and treating the depleting figure as a minimum. Using the higher target gives you some protection against a bad run of returns that a single straight-line projection won’t show.
Your tool sounds very impressive. Thanks for pointing readers to the other resource too. We haven’t reviewed it, so we can’t comment on it, and readers should treat any calculator as a starting point rather than advice.
Thanks again for contributing. Comments like this make the discussion better for everyone.
Hi Stuart
Thanks so much for all the knowledge you share and I love your podcast, also read your book Wealth by design
I must say I am pretty excited to see these tables and although we don’t have a too many millions we can see that we are definitely in a good place.
I am wondering if you have investment properties can you use the $ value (in table 1) column 10yrs or 15yrs if you feel you will carry these past 60? Say planning to sell 1 at 65 and 1 at 70?
Also I ran your numbers through Noel Whitakers Retirement drawdown calculator and the numbers match 🙂
Thanks again and please keep up the good work
Thanks for your kind words and support of the podcast and book. I’m pleased the tables have helped you feel more confident about your position.
You can use Tables 1 and 2 to estimate your property equity at a later sale date. The columns represent years from today, so the 10-year column applies if you expect to sell in 10 years. Remember to deduct the corresponding debt figure from Table 2.
However, if you retire at 60, you can’t simply add the projected property values at 65 and 70 to your super balance at 60 and compare that total with the retirement target. Those values relate to different dates.
For the initial benchmark, use the years remaining until retirement consistently across all tables. Holding the properties beyond that date may work well, but you would then need to model your retirement cashflow, including net rent, property expenses, loan repayments and spending until each sale, followed by the proceeds after debt, tax, and selling costs.
The tables are a useful starting point. Staggered sales need a more detailed projection to check that the timing works.
– Jim on Behalf of Stuart
Hi Stuart, what a fantastic episode! Thank you for sharing the numbers. This episode easily makes it one of my top 5 Investopoly episodes of all time.
You mentioned in many of your podcast that paying off investment debt completely is not ideal. You added that gearing to 30-40% with neutral cashflow is preferred. Why is that? If one has paid off their PPOR and already invests in an ETF portfolio on a monthly basis and maximises concessional super contribution, would it be ok to completely pay down the debt for the investment properties? Or would you rather keep the loan at interest only and increase the amount to invest in the ETF portfolio?
Thanks
Thanks for the fantastic feedback! Really appreciate it.
The main reason I favour moderate gearing (30–40%) is that it allows you to maintain exposure to growth assets while directing surplus cash flow towards other investments, such as ETFs. Over the long term, this can help accelerate wealth creation.
That said, it really depends on your circumstances, particularly your taxable income, marginal tax rate, investment timeframe and retirement goals. The higher your marginal tax rate, the lower the after-tax cost of deductible investment debt.
In your situation, with your home paid off, regular ETF investing and super contributions maximised, you’re already doing a lot of the right things. I’d generally favour maintaining manageable investment debt and continuing to build your ETF portfolio, rather than aggressively paying down tax-deductible debt.