How you hold your investments matters as much as how much you have. This section models the tax efficiency of different structures to fund your $80,000/yr lifestyle.
| Structure | Gross Income Needed | Tax Paid | Net Income | Effective Tax Rate |
|---|
✨ Recommended Optimal Split
Toggle strategies below to model their combined impact on reaching your FI Number faster.
| Age | Super Balance | Non-Super | Total | Contributions | Returns | Tax |
|---|
🎯 What is Financial Independence?
Financial independence (FI) is the point where your investment portfolio generates enough passive income to cover your living expenses — making paid work optional, not mandatory.
Your "FI Number" is the portfolio size needed to sustain your lifestyle indefinitely (or to a target age). It's not about being rich — it's about having enough.
📐 The 4% Rule Explained
The "4% Rule" comes from the Trinity Study (USA, 1998): a retiree withdrawing 4% of their portfolio annually, adjusted for inflation, had a high probability of not running out of money over 30 years.
In practice, your safe withdrawal rate depends on your investment mix, time horizon, and whether you want to preserve capital or draw it down. We model both approaches here.
🏦 Super vs Non-Super: Why Both Matter
Super is tax-advantaged (15% on earnings in accumulation, 0% in pension phase) but locked until preservation age (60). Non-super investments are accessible anytime but taxed at your marginal rate.
If you want FI before 60, you need enough non-super investments to bridge the gap. After 60, your tax-free super pension becomes a powerful engine.
🚀 Tips for Reaching FI Faster
1. Maximise salary sacrifice to the $30k cap — the tax savings accelerate wealth.
2. Invest non-super savings consistently (dollar-cost averaging).
3. Review spending — each $10k less you need annually reduces your FI Number by $250k (at 4%).
4. Consider debt recycling to make non-deductible debt work harder.
5. Don't forget insurance — one setback can wipe years of progress.
This calculator provides general illustrations only and does not constitute personal financial advice. Key assumptions include:
- Investment returns are nominal, pre-fee estimates based on long-term averages — actual returns will vary significantly year to year
- Tax rates are based on 2024–26 Australian individual rates (Stage 3) and may change
- Superannuation rules (contribution caps, preservation age, tax) are current as at the date of use and are subject to legislative change
- Inflation is assumed constant — real inflation varies
- Transfer Balance Cap is $2,000,000 per member (current as at 2024–25)
- Bucket company tax rate is 25% (base rate entity). Franking credits are modelled as fully franked distributions
- The model does not account for: Centrelink means testing in detail, insurance costs, debt repayments, one-off expenses, or changes in income over time
- Franking credit modelling is simplified and assumes a consistent dividend yield
- Age Pension eligibility is noted but not fully modelled
- Preservation age is modelled at 60 for all members
Always seek personal advice from a licensed financial planner before making financial decisions. Contact Merit Financial Services at meritfp.com.au for a tailored plan.