How close are you to retirement? The financial advisor presents his flawless algorithm for determining when one can retire.
A five-minute exercise to determine when you can retire comfortably can be completed in that amount of time.
James Wrigley, a financial advisor, disclosed the formula on his TikTok channel.
To afford retirement, Australians are remaining in the labor field for extended periods of time
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A financial advisor has disclosed a formula that can be rapidly calculated on a single sheet of paper to determine how far away you are from retirement.
This week, finance guru James Wrigley shared the exercise on his popular TikTok channel, noting that ‘for individuals wanting to trade in the 9-to-5, this can demonstrate the gap you need to fill in order to retire’
In recent years, Australia’s retirement age has progressively risen as the cost of living has outpaced income growth and low interest rates, while fantastic for borrowers, discourage investments.
Mr. Wrigley stated that calculating the gap between your current financial situation and your desired position was simple.
He stated, “All you need is a piece of paper and a pen to scratch this out in less than five minutes.”
“On a sheet of paper, list your nest egg assets in the upper left corner.
This includes cash in the bank, savings accounts, term deposits, superannuation money, and any investment real estate or stocks. And add them all together.’
According to official statistics, Australians work longer and retire later (stock image)
Mr. Wrigley then clarified that the upper right corner is for “lifestyle assets,” which are typically the majority of the items you use daily.
“The worth of your home, a vacation home if you have one, your automobiles, boats, RVs, and motorcycles,” he stated.
Then, whatever money you owe is listed on the bottom left.
‘That includes your home loan or mortgages on other properties, a car or boat loan, the total amount you owe on credit cards or buy-now-pay-later services, and personal loans,’ he explained.
Mr. Wrigley added that to calculate one’s “net nest egg balance” or liquid assets currently accessible for retirement, one must remove the total debt amount from the net nest egg asset balance.
He stated, “This is the sum that will put you in a position to retire, not your lifestyle assets.”
These things are good to have because they make our lives more comfortable and enjoyable, but they do nothing to help you retire.
Mr. Wrigley (left) divided a sheet of paper into four pieces, listed his assets and liabilities, and then applied his calculation (right)
To calculate the difference between your net nest egg balance and what you need to retire, an additional step is required.
‘Ideally, you should calculate how much you want to spend every year in retirement – $60,000, $100,000, or whatever that number is after taxes – then multiply it by 20 to get how much you’ll need for retirement,’ he advised.
Mr. Wrigley stated that the figure 20 would typically give sufficient cash flow from investments to sustain a solid income whether you retire at age 50 or 70.
He said, “So that’s where you need to be, and your net nest egg is where you are.”
“If there’s a gap, you can work on closing it, but assuming it’s already larger, congrats, if your setup is correct, you can probably retire today.”
FINANCIAL ADVISER’S RETIREMENT FORMULA
A sheet of paper is divided into four pieces. And jot down:
Cash/savings, superannuation, investment properties, and shares are examples of NEST EGG ASSETS.
Examples of LIFESTYLE ASSETS include a home, vacation home, automobiles, a boat, a camper, and bicycles.
Mortgages, auto loans, boat loans, van loans, credit card balances, buy-now-pay-later balances, and personal loans are examples of DEBTS.
Deduct debts from nest egg assets to reach a net nest egg total.
In the blank column, enter the amount you estimate you’ll require annually in retirement and multiply it by 20.
The difference between the net nest egg and this sum is the amount required to retire.