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As more Australians plan to work for longer, a highly paid university executive has turned down a multi-million-dollar pay packet to retire early and travel the world with his wife.
Central Queensland University Vice Chancellor Scott Bowman is paid an annual salary package of more than $500,000 and last year signed a contract to remain in the position for another five years.
But after some quiet reflection and soul searching, Professor Bowman, 55, and his wife, Anita, 56, decided to cut short their successful careers and follow their dreams of travelling around the world.
“I’ve never really worked just for the money. The money has been a really great benefit of working but it’s always been the job,” Professor Bowman said.
“That never came into it — that I’m going to lose five years’ salary.
“It probably adds up to the best part of $3 million, but I never thought of it in those terms.”
A working-class man
Professor Bowman is one of the youngest vice chancellors ever appointed in Australia, and one of the youngest to retire.
He is also one of the few in his position who does not have a Bachelor’s degree.
“I come from a very working-class family, both of my parents were factory workers,” he said.
Growing up in Northamptonshire, about 100 kilometres north-west of London, Professor Bowman did not achieve the grades he needed to attend university and instead entered the workforce through a hospital-based radiography training program.
He later moved into teaching radiography which led him into a university setting where he said he talked his way into a master’s degree in politics and government.
“I got a masters degree just at the right time, so I was one of five people in the UK that was a radiographer and had a masters degree and that gave me a very fast progression,” he said.
Living for the now
Ms Bowman, an Associate Professor, also works at the university as the Head of Department for Medical Imaging and Science.
She said working in the medical industry influenced her attitude towards early retirement.
“I see so many people come in to be scanned and they’re so excited about their plans for what they’re going to do in their retirement and then they get unwell and their plans go by the board,” she said.
“Not that either of us are unwell, but you don’t know how long that will persist.”
The couple, who met on a group tour through the Sahara Desert in their early 20s, said their love of travel was rekindled during a recent three-month holiday through outback Australia and rural Africa.
They loved every minute and knew it was how they wanted to spend the next stage of their lives.
But that does not mean they have not had second thoughts about quitting work.
“I’ve just come from a meeting where we’re discussing about 20 really exciting projects and the thought of walking away from that is difficult,” Professor Bowman said.
“I love the job, but there will always be a reason to stay on.
“The question is, are we willing to wake up one day and say, ‘well that was good, but we’re now 75 and those plans that we had, we’re not going to be able to do now, because of our age’.”
The Australian Bureau of Statistics’ 2016-17 Multipurpose Household Survey found that on average, Australians aged 45 years and over were intending to continue working until the age of 65, up from 63 years a decade ago.
Of the 3.9 million people in the labour force over the age of 45 who indicated they intended to retire, the survey found that only 60 per cent had a particular time frame in mind.
Seven per cent of those intended to retire between 54 and 59; 23 per cent intended to retire between 60 and 64; and half intended to retire between 65 and 69, with 20 per cent intending to continue working beyond the age of 70.
Doing it on the cheap
For those who are not earning six figure salaries and do not have a million dollars or more in superannuation to fall back on, early retirement might seem like a pipe dream.
But the Bowmans say it can be done.
They plan to spend the next 10 years travelling the world on about $70 a day — that’s $25,500 a year.
“We are in an incredibly fortunate position, and I understand that a lot of people in Australia aren’t in that position,” Professor Bowman said.
“But then again, we’ve been following a lot of websites and there are people in their twenties doing exactly what we’re going to do.”
They bought a four-wheel drive truck set up as a self-contained camper, with solar electricity and air conditioning.
“We’re going to ship that over to Canada and then come back to Australia the long way,” he said.
“There are people doing that for $32 a day for a couple.”
Grey nomads leading the way
Queensland retirees Kevin and Pamela Milner bought a caravan two years before they stopped working at 65 and 60.
Despite having a limited amount of superannuation, they are able to spend three months of every year travelling to different parts of Australia.
Mrs Milner said almost anything was possible in retirement if you simply lived within your means and planned ahead.
“To holiday, it doesn’t cost us much more than being at home,” she said.
“We have always lived within our means.”
Mrs Milner said the concept of having a million dollars in superannuation before retiring was unrealistic for many people of her generation.
“No way, but what we had, we paid for — our house, our cars.
“We put a solar system on our house so there was no electricity bills,” she said.
With 11 grandchildren to dote on, the Milners enjoy coming home for much of the year, but said travelling is a fantastic lifestyle.
“Last year we did the Cape and the Northern Territory, the year before we did South Australia and Western Australia, the year before that we did Broome and this year we’ve done Tasmania.”
Living within their means
Currently camping in a national park on the east coast of Tasmania, the Milners rely mostly on Kevin’s aged pension to fund their daily expenses, while Pamela’s modest super is used to cover big bills like insurances and registrations.
“Everybody lives differently. Even in these free camps people are different,” she said.
“I cryovac all our meat and freeze it before we leave Yeppoon, but some people go to the pub for dinner so they don’t have to cook,” she said.
After raising four children and both working full-time for most of their lives, the Milners said they wanted to enjoy retirement fully and began making solid plans about three years ahead.
“Kev has been a carpenter since he was 15, so he has worked really hard all his life, six days a week,” Mrs Milner said.
“I’m a mum of four and I worked a full-time job as well as bringing them up and taking them to sport.
“We were laughing the other day with my sister that some weeks, there’d be 50 cents left in the bank before the next pay went in.”
They said after such a full and busy lifestyle they were not ready to retire any earlier than they did.
“We didn’t consider that it was early — it was just time to enjoy life,” Mrs Milner said.
While they have no plans to stop travelling, Mrs Milner said they would probably be forced to sell the caravan when they reach their mid 70s.
“We talk to lots of people on the road and they say with a caravan, driving it, unhooking it, probably 75 sees most people out,” she said.
Financial planner David French, whose business employs 42 staff, said 80 per cent of his firm’s work was made up of retirement planning.
He said a superannuation capital amount of $400,000 should provide dividends of about $25,000 a year if the fund is returning 7 per cent on investment.
But if you were born later than July 1, 1964, you generally cannot access your superannuation until the age of 60, so what do you do in the meantime if you want to retire at 55?
Mr French said there were other ways to fund that ‘gap’ period but the most important thing to decide was how you wished to spend your time.
“People don’t really give a lot of thought to what retirement actually means,” he said.
“There are different ways to perceive retirement — one is to sit on the couch and watch footy and Days of our Lives.
“But maybe it really means just being able to control your time.
“That might mean you take on a little bit of work here and there, and supplement it with a little bit of money from savings.
“So you are able to call the shots about what you do with your day, but you’re still earning some money on the way through,” Mr French said.
Once you know how much your lifestyle will cost, Mr French said you could plan ahead with the help of a professional and devise a way to fund it.
“One way to do that is to build an investment portfolio outside of super and you might do that in a company or a trust or something to provide some tax benefits along the way,” he said.
“Or you might have a small business that you’ve decide to sell at 55 and once you’ve sold it there’s tax concessions — subject to certain rules, and if you’ve had the business for quite a while, that money might be all tax-free.
“There’s lots and lots of options.”
Mr French said superannuation legislation was complex and ever-changing so it was important to seek individual, professional financial advice.
“There are too many moving parts and unless you are really going to spend some time getting to understand Centrelink, the tax laws, and the superannuation laws and how they all work together, you are going to make some big mistakes, ” he said.
Mr French said many people wait until it is too late to see a financial planner.
“It’s a bit like dying,” he said. “We all know it’s going to happen but you just put it to one side.”
Mr French said the most important way of ensuring your financial security in retirement is to take an interest in your superannuation now.
“The best results we’ve had with clients, is when the client has taken an interest,” he said.
Tips to maximise your super
- Consolidate your superannuation funds into one fund to reduce fees and compound returns
- Contribute more than than the compulsory 9.5 per cent through salary sacrifice or after-tax contributions. Be careful not to go over the $25,000 annual limit
- Some funds offer a feature that allows you to roll up spare change into your super account. For example, when you buy a coffee for $4.50, 50 cents automatically transfers from your bank into your super account
- Consider a more aggressive investment option than the default balanced portfolio if you have a long way to go until retirement. But be warned, the returns can be higher and so is the risk
- Basic personal finance principles remain important: avoid high interest debt such as credit cards and personal loans, live within your means and save 3-6 months pay into a savings account as a rainy day fund for unexpected bills or sudden loss of employment
- Owning your own home is also a big factor in early retirement. Paying a little extra into the mortgage each month can knock years off your home loan
Source: Financial Services Council
“The conversation is a much more of a constructive, two-way conversation, rather than saying, you are the expert, you tell me.”
Mr French says the financial planning industry now must operate on a fee-for-service basis, so potential clients can and should ask for a fee schedule up front.
Don’t wait until it’s too late
Financial Services Council chief executive Sally Loane agreed people needed to engage early with their superannuation fund regardless of when they planned to retire.
She said there was a whole generation of Australians who had not saved enough super to fund their own retirements, independent of the aged pension.
Ms Loane said that was mostly because superannuation did not become compulsory until 1992.
“For me, I’d just had my first child, it was only three per cent of my wage and I thought I could do more with it,” she said.
“I didn’t engage early enough, I didn’t concentrate on it, and I didn’t put more money in when I should have.”
Ms Loane said Australians had more than $2.5 trillion in superannuation funds and should take a greater interest in their own finances.
“A lot of people don’t get engaged with their super until their 40s or even 50s and I would argue that that’s almost too late.
“Don’t just set and forget,” she said.
Ms Loane said new technology and digital apps were making superannuation more accessible for younger workers with many funds now providing features like rounding up, where for example, if buy a coffee for $4.50, your bank automatically transfers the ’round up’ amount of 50 cents to your superannuation account.
“There are many ways of course to accumulate wealth before you want to retire, but superannuation is very effective and it’s the one everyone has access to,” Ms Loane said.
“The best savings method for tax concessions is still superannuation, even though it has been wound back a bit, it’s still the most generous when it comes to taxation concessions.”