Think houses not dollars

[bluestorm]

I don't really see the point of thinking in terms of houses instead of dollars. Why limit yourself only to property?

It's a property forum, so they all think property. I would diversify a little. But I think a lot agree on around about $100K/yr minimum passive income. That's a lot better than the majority of retirees.
I think what the original post is saying is that people think of a total dollar amount for retirement (eg, assets + super = $2m), rather than thinking in terms of a suitable and reliable passive income amount per year (plus assets). This approach I think often leads to people overestimating the quality of retirement, when the dollar asset amount does not generate the sort of income they had hoped for.

Geez, not much at all for a couple who are retiring is it? You'd really want to be relying on super as well to fund your retirement.

Why not. $100K/yr is comfortable. $65K after tax. $25K to travel 3mths of the year (Travel is much cheaper these days), then the rest to live comfortably.

Unless your retirement has a kings lifestyle involved (1st class travel, 5star hotels, Queen Mary ships, etc). Maybe this is why people just work and work until 60-65. For that "dream" retirement.

 

[jaycee]

It's a property forum, so they all think property. I would diversify a little. But I think a lot agree on around about $100K/yr minimum passive income. That's a lot better than the majority of retirees.
I think what the original post is saying is that people think of a total dollar amount for retirement (eg, assets + super = $2m), rather than thinking in terms of a suitable and reliable passive income amount per year (plus assets). This approach I think often leads to people overestimating the quality of retirement, when the dollar asset amount does not generate the sort of income they had hoped for.



Why not. $100K/yr is comfortable. $65K after tax. $25K to travel 3mths of the year (Travel is much cheaper these days), then the rest to live comfortably.

Unless your retirement has a kings lifestyle involved (1st class travel, 5star hotels, Queen Mary ships, etc). Maybe this is why people just work and work until 60-65. For that "dream" retirement.

Ah, I think you hit the nail on the head, cause I too could not see past what Alex wrote. That;s the thing when I've spokem to a people who don't invest, that they don't seem to be able to wrap their heads around that,

However, I would like to try to retire on more than 65k nett

 

[Paul Do]

I am going to suggest a somewhat different method limited to real estate, with the following steps

This is consistent with an example I gave in my book, but here's a simplified way of looking at it.

Average Weekly Earnings is roughly $1250 or $65k p.a. A median Sydney house that was yielding 5% would yield half of this (nearly all are less than 5%, and net is even less, but I'm keeping the example simple). Thus, if an individual or a couple needed average weekly earnings in retirement, then they would need two median houses paid out right, and anther one to live in. Over time, prices and rents would increase roughly in line with AWE.

However, this assumes that they'll leave these 3 houses behind when they go. If they were to draw down the equity so that they left nothing to the kids, then they would need fewer houses in retirement to provide for their income.

 

[bluestorm]

Ah, I think you hit the nail on the head, cause I too could not see past what Alex wrote. That;s the thing when I've spokem to a people who don't invest, that they don't seem to be able to wrap their heads around that,

However, I would like to try to retire on more than 65k nett

Well you can work longer than . More would be nice of course.
But consider how much you actually "live" on now (pure spending money). $65K nett (that's maybe ~$50K/yr spending money). I can tell you, even with the travel now, going out (including eating out at least 4 nights a week), shopping, and living comfortably, I doubt we'd be spending $1000 clear a week (even now on $210K combined income). The "retire on the same income as when you finish work" argument is nonsense (as your income now is also used to acquire assets to live off in retirement).

PS: When I say $100K/yr passive income, I'm really talking a nett resi amount before tax (ie, so maybe $2500 actual gross rent, less $500/wk resi expenses = ~$2000/wk). So your final 65k nett after tax is pure spending and personal expense money.

 

[Gordon Farkus]

PS: When I say $100K/yr passive income, I'm really talking a nett resi amount before tax (ie, so maybe $2500 actual gross rent, less $500/wk resi expenses = ~$2000/wk). So your final 65k nett after tax is pure spending and personal expense money.

Tax on $100K is currently about $26K, so actually net $74K approx. Even better.

 

[bluestorm]

Tax on $100K is currently about $26K, so actually net $74K approx. Even better.

I'm being conservative . With the amount of debt the federal government has accumulated, the tax on $100K could well be a lot higher in future years to pay it all off. I like to work with my buffers (not best case scenarios).

 

[jaycee]

Well you can work longer than . More would be nice of course.
But consider how much you actually "live" on now (pure spending money). $65K nett (that's maybe ~$50K/yr spending money). I can tell you, even with the travel now, going out (including eating out at least 4 nights a week), shopping, and living comfortably, I doubt we'd be spending $1000 clear a week (even now on $210K combined income). The "retire on the same income as when you finish work" argument is nonsense (as your income now is also used to acquire assets to live off in retirement).

PS: When I say $100K/yr passive income, I'm really talking a nett resi amount before tax (ie, so maybe $2500 actual gross rent, less $500/wk resi expenses = ~$2000/wk). So your final 65k nett after tax is pure spending and personal expense money.

Do you notice we are back to the "how much MONEY do I wnat to reitre on ?

Once you determine that, I am sure you can calucate how many houses you need, how much in shares or any vehicle you choose to use.

 

[bluestorm]

Do you notice we are back to the "how much MONEY do I wnat to reitre on ?

Once you determine that, I am sure you can calucate how many houses you need, how much in shares or any vehicle you choose to use.

OK I suppose we are. I think you ultimately have to work out some figures that you will be comfortable with. The original post of using houses not dollars, as in 6 house rather than a money figures is a little off I suppose, as a house can range from 300K to 4mil (a huge range in your financial independence amount).

I did put my own spin on it. The general man on the street I think thinks backwards. That is, they will have $400K in super (pumping more money into super closer to retirement), a house worth $1.5mil, $400K in shares, etc. then retire. They work till 60-65 aquiring assets, to get the highest dollar amount possible before they retire. It's at a late stage that many consider how much income their assets will actually generate in retirement. Many then still need to tap into the pension to fully fund retirement). There are many retirees sitting in $2.5mil homes, but living a pitiful existence on a pension.
I think the way to approach it is to determine a passive income level, and then retire once you are happy with that level. Not to think about a total asset amount, but think from a passive income perspective from the outset. For example, my website I'm developing, might be $0 in assets, but generate $1000/mth in passive income, etc.

 

[jaycee]

I think you ahve to use $ figures like you siad, howver quanitfying those $ figures into somehting can give perspective, particulary if people are not familiar with the subject. I was thinking more along those lines, newbies etc, but you make a good point, it's not just newbies...

 

[jaycee]

Well you can work longer than . More would be nice of course.
But consider how much you actually "live" on now (pure spending money). $65K nett (that's maybe ~$50K/yr spending money). I can tell you, even with the travel now, going out (including eating out at least 4 nights a week), shopping, and living comfortably, I doubt we'd be spending $1000 clear a week (even now on $210K combined income). The "retire on the same income as when you finish work" argument is nonsense (as your income now is also used to acquire assets to live off in retirement).

PS: When I say $100K/yr passive income, I'm really talking a nett resi amount before tax (ie, so maybe $2500 actual gross rent, less $500/wk resi expenses = ~$2000/wk). So your final 65k nett after tax is pure spending and personal expense money.

Make it $70k and we got a deal ! I would be comfortable retiring on that amount of spending money. I assume I'm allowed to keep trying to increase what I got ? I could make that work !

What made me think, naah though, was I woudn't feel comfortable spending all my cashfow positive money, perhaps it's a bit of "what if it doesn't last" fear..

However, I am far enough away from that and getting way too close to 42 to retire then, so I have time to keep looking into this as I go along

 

[bluestorm]

Make it $70k and we got a deal ! I would be comfortable retiring on that amount of spending money. I assume I'm allowed to keep trying to increase what I got ? I could make that work !

What made me think, naah though, was I woudn't feel comfortable spending all my cashfow positive money, perhaps it's a bit of "what if it doesn't last" fear..

However, I am far enough away from that and getting way too close to 42 to retire then, so I have time to keep looking into this as I go along

Then you have a different fear to me. I fear what if it lasts too long. That is you work till 60 to accumulate more money thinking of a comfortable retirement, then cark it at 70, or are too old to do much travel anyway, or do anything much because you start having all sorts of medical problems. Maybe they can bury you will all your assets.
If it's passive income producing and enough to live comfortably, then your not eating into your assets, so technically, it could last indefinately. I'll retire at 42, but then technically also have another injection of capital at 65 from super.
But that's just me. The worst case scenario with $60K/yr would be to live like a king 6mths of the year on some nice island in Thailand, with maids, etc.