Pretty normal stuff. No superyachts. Just the freedom to go fishing on a Tuesday without checking the bank account first.
Step #2: Turn that spending goal into a Wealth Goal
This couple wants to spend $100,000 a year starting in 20 years. So, how much wealth do they need to make it happen?
Once you run the numbers, the answer is just shy of $3.4 million in investments. That’s a lot of money. But, remember you’re probably not starting from 0.
Step #3: Work out what you’re doing now, and if you have a Wealth Gap
Even if you don’t feel like you’re investing much now … you still might be if you have KiwiSaver.
And even if you don’t have a lot of wealth today, your current investments could grow substantially over time.
So you want to understand how much money you’ll end up with if you just keep doing what you’re doing now.
That’s what a good plan calculates.
If there is a difference between how much wealth you’ll need. And how much wealth you’re on track to have … then you have a Wealth Gap.
For this couple:
- They’re projected to have: $900k by retirement
- But they need: $3.4 mil
- So their Wealth Gap is: $2.5 mil
If they did nothing, their retirement income wouldn’t be $100,000 a year. It would be around $29.4k. That’s a $70.6k annual shortfall.
