How much sooner can the average Australian retire through investment?#
To answer this question, we can use our previously created ‘years to retirement’ function, which calculates how many years it would take to build an investment, such that the interest alone would cover our yearly living cost.[1] The function requires 4 variables: retirement living costs, monthly investment amount, investment performance, and initial investment amount.
We assume that we have made no prior investments, such that our initial investment amount is 0. We also assume our investment performance is 4%. This then leaves us to figure out our retirement living costs, along with our monthly investment amount.
The average Australian earns roughly \(100k per year.[^abs] This equates to around \)74k post-tax.[2] The average Australian spends \(4k on living expenses per month.[^numbeo] When considering our average salary, this then leaves \)2k to spare as our monthly investment amount. Additionally, we can use the average living expenses as our retirement living costs.
Assume that our candidate is a 25 year old who would normally work until 65. Plugging these values into our ‘years to retirement’ function gives us 12.4, meaning the average Australian can retire 12.4 years sooner through investment.