Four Simple Steps To Retire




Hi folks

There is SO much hype around how to prepare for retirement and making sure you have "enough". It can be plain confusing - scary even. It makes us nervously look at our superannuation, investments, budget spreadsheets and savings and chew our pencils down to the lead. Predictably, there is a whole vulturous industry out there making an absolute killing from folk's retirement fears.

As a dividend investor, I pretty much completely ignore all the advice floating around and I most certainly ignore the TV, glossy finance magazines and the papers.

I calculate my future retirement income needs differently - here's how:


Four Simple Steps To Retire

1. How much yearly income do I need to not have to go to paid work anymore and live a simple but  interesting life? (write down your answer)

2. As a conservative, old-fashioned investor of fully franked dividend shares, then how many shares will I need to hold to give me that exact dividend income each year? (write down that number)

3. Get busy buying up that exact number of shares over as shorter time frame as possible.

4. Once that number of shares is bought - retire.


It truly is that simple.  Start today.


I am going to do a post on each of these 4 steps to practically flesh this subject out a little - but it honestly is that simple.


Take care folks and stay nice.


Mr HM (Phil)

PS - today's blog picture is home made pizza made with scone dough as the base and left overs from the fridge as topping.  Freshly baked, frugal and gone in a flash by the hungry hoards.

Comments

  1. Too true. We seem to like making everything complex, or assume it can't be simple because investing seems like such an overwhelmingly large topic from the outside.

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    1. I reckon it's because large profits and fees can be easily attached to complexity and fear - it is good for some industries!

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  2. Pizza looks yum! I have to admit this whole retirement things just about does my head in. I love what my hubby says though, how much you need depends on what kind of lifestyle you intend to lead during those retirement days. If it's extravagant, you need more. If it's simple, you need less. Meg:)

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    1. Hubby is correct I think. It is also simplifying life to just what is beautiful and useful not all the other things others expect of us.

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  3. I'd be very interested to see how you determine exactly how many shares to buy.
    :)

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    1. Will certainly be doing a post on that, but I can see from your writings that you know your stuff .... so consider the following.

      Choosing older stable LIC's whose dividends are very stable (even during a crash) you can figure out how much dividend you will get per share per year. Then it is just very simple primary school math to work out how many shares you need to generate your required annual FIRE income.

      e.g. LIC XYZ pays 25c worth of fully franked dividend per year. Your yearly FIRE income needs to be $50K so therefore you'll need 200,000 of these actual shares. Buying those shares little by little and doing DRP and DSSP they accumulate pretty quickly actually.

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  4. I look forward to reading the posts detailing the 4 steps Phil.

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  5. Thanks for your blog Phil! So if I am correct, if one wanted to retire on $50K pa, and their dividends returned say 5% pa, they would need to acquire $1,000,000 in holdings (i.e. LIC's) before being able to do so?

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    1. HI Linda - that would be the worst case scenario. Having to acquire $1M would only occur if you decided to buy holding just prior to retirement. With the power of compounding over time you would only have to acquire a certain percentage of the required holdings and the rest would compound via 1. dividend reinvestment over time, dividend growth over time and buying up big during times of gloom. Using these three principles you would never have to depart with anything like $1M. Also remember that dividend return is only ever stated as a percentage of the holding price at the time of the dividend announcement - so in reality of you had followed the three previous principles your dividends would actually be a percentage of what you actually paid for them - if you are wise and target buying holding that have dividend growth then the holding you bought 10 or 20 years previous would be returning very high percentages of return compared to the parcels bought recently, but as times go on the percentatge return grows and grows.

      So the simple answer to your question is Yes, but the realistic answer over time is No :-)

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