Ask a serious investor what they need to retire and most will give you a number within a few seconds. A million. Two. Five. What is striking is how quickly the answer comes, because a number that arrives that fast has usually not been calculated. It has been absorbed. Picked up from a headline, a dinner conversation, a super fund advertisement, and carried ever since as if it were true.
Here is the problem. A borrowed number cannot tell you whether you are ahead or behind, because it was never a measure of your life. It is somebody else's arithmetic wearing your name. And you cannot plan toward a destination you have not actually defined.
Last edition we asked whether you are on track. This one comes first in the logic even though it comes second in the series, because being on track only means something once you know the track leads somewhere real. So before you measure the gap, build the destination. Here is how the number is actually made.
Your retirement number is not a wealth target. It is an income problem worked backwards. You do not need a particular pile of money. You need a particular amount of spending, reliably, for the rest of your life, and the asset base is simply whatever it takes to produce that. Start from the spending and the number builds itself. Start from the pile and you are guessing.
This matters more in 2026 than it did two years ago. The tax settings that govern how property converts into retirement income are being repriced from 1 July 2027, and the way you harvest a portfolio is part of the calculation, not a detail to sort out later. A number built on the old assumptions is already out of date.
The whole calculation is four moves. None of them requires precision. All of them require honesty.
Begin with the only figure that is genuinely yours: the annual after-tax income you want to live on. Not survive on. Live on. The travel, the help with the grandchildren, the buffer for the year something breaks.
The insight: this figure is the foundation of everything downstream. Get it wrong and every later number is precise nonsense.
The spend is in today's after-tax dollars. The number has to be built in the dollars you will actually draw, and in the year you will actually draw them.
The insight: today's dollars are not retirement dollars. Skipping this step is the single most common reason a number that felt safe turns out to be short.
Now convert the income into the asset base that can produce it without being consumed. This is the step people skip entirely, and it is the one that actually answers the question.
The insight: a large portfolio that produces little spendable income is not a retirement. It is a second job with a good balance sheet.
The number you have built is the total. It is not the gap. From it, subtract what is already on the way: superannuation at preservation age, and the net equity your current portfolio will hold once its debt is paid down.
The insight: the gap, not the total, is the number you act on. Everything before this move exists to produce this one.
The harvest phase is where the reform actually touches this calculation. From 1 July 2027 the fifty percent capital gains discount is replaced by indexation of the cost base and a minimum thirty percent rate on the real gain. In plain terms, selling down assets to fund retirement is taxed differently, and for many holdings less favourably, than the rule most long-term plans were built on.
That does not make property a worse retirement vehicle. It makes the method of drawing income from it more important. Holding and releasing equity, staging any sales, and the order in which assets are drawn all matter more under the new regime than under the old one. One honest caveat: elements of the transition are still being set by regulation, so treat the mechanics as the current shape rather than the final word, and take personal numbers to a licensed adviser. The point for now is simpler. Build your number on the regime you will actually retire into, not the one you started investing in.
Sam is 52. Disciplined saver, two investment properties, and for years he has carried the same figure everyone in his circle seems to carry: he needs $3M. It has never been tested. This week he tests it.
He starts at the spend. The household lives comfortably on about $8k a month now, but the mortgage on the family home accounts for a chunk of that and will be gone by retirement. Add back the travel he keeps deferring, and the honest lifestyle figure is around one hundred and twenty thousand a year, after tax, in today's money.
He grosses it up and inflates it. Drawn from assets and pushed out thirteen years at modest inflation, that lifestyle needs materially more than one hundred and twenty thousand of pre-tax income in the year he actually retires. He works in bands rather than decimals, because every input is a range.
He turns that income into a base. At a sustainable real draw, the figure he needs points to a net asset base in roughly the $2.5M to $3.5M range, working after debt. Which is the interesting part. His borrowed $3M was not absurd. It was simply never his number, and even now it only exists as a band, not a fact.
Then he subtracts. His super will do real work by preservation age. His two properties, debt cleared, hold solid net equity. Against the base he needs, the remaining gap is not another three million. It is one more quality acquisition, held and paid down through the years he still has PAYG income to support it, and the plan works. The number that had quietly worried him for a decade turned out to be a single, specific move, made in a window that is still open.
I have watched more good investors held back by a vague number than by a bad one. A vague number cannot be argued with. It just sits there, too large to feel achievable, too undefined to plan against, quietly generating the anxiety that either freezes people or pushes them into decisions they have not thought through. The moment you replace it with a real one, built from your own life and your own balance sheet, the problem usually shrinks. Not always. But usually. And even when it does not shrink, at least you are now solving the right problem instead of carrying the wrong one. Define the destination first. Everything downstream gets easier, or at least honest.
See you next week.
— Alex
Want to see the gap between where you are and the number you actually need? The Property Portfolio Gap Analysis walks you through it. Find it at pbco.com.au.
This article is for educational purposes only. It does not constitute financial, legal, or tax advice. Everyone's circumstances are different. Please seek professional advice before acting on any of the strategies outlined above.