As I was updating my FIRE target for inflation this year, I realised that I hadn’t reviewed my FIRE goal since meeting my partner. Joining our finances affects both our expected expenses, as well as the taxation of our income in retirement.
If I take my original target of $70,000 after tax or $92,000 pre-tax in 2021, this would be equal to $78,800 and $103,600 respectively in 2024. However, when taking my husband into account, this is actually $39,400 each after tax, which only requires a total portfolio return of $90,000 pre-tax! However, before I celebrate too much, I need to look at the other side of the equation too.
Based on our recent spend (not counting one off expenses such as our wedding and honeymoon), and adding a target of $20,000 per year as a travel fund, our joint annual expenses in retirement is forecasted to be $90,000 in current dollars. This would be an after-tax income of $45,000 each, which requires $104,000 pre-tax total returns. At the conservative 3.5% withdrawal rate I have been using thus far, this still necessitates a portfolio of $2.98 million.
So actually, my target net worth hasn’t changed much following this review. But as you can see, the target income in retirement has changed significantly! I am going to need to review my target more regularly going forwards to continue taking into account the greater tax efficiency as a couple. And at some stage I’m actually going to need to look at how the tax effective haven of superannuation plays into this too. However, not taking super into account for now means I’m overshooting my target, which is better than the opposite!
Chasing FIRE Down Under 