Ouch - tough question.
Early retirement without a fortune
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Ouch - tough question.
Actually, this is true, is the glass half empty or half full.
If to you it is half empty you become needy and the world owes you...
if half full, you have abundant opportunity and own the world.
Regards Peter 14.7
I'm a member of a church that distributes food. We give to anyone who asks.
Hi Delilah
What did you think about Mr money other thought. Which one for retiring early resonated with you most.
Regards Peter 14.7
His blog is great. Whoever mentioned it, thank you. Totally inspired me to make some cuts and changes.
I love the living off compounding interest idea. We have several homes and it makes me feel very tied down. Paying rates, organising maintenance, finding and keeping good tenants. I'm totally going to get them to a point where they've made me my money, then sell them, stash the money and live on the interest. Then I can jey set to Italy without worrying that a rates notice is due or a routine inspection is over due
I love that he is not about being rich and spending up. He's for living a nice and comfortable life on less. To me the more homes you have the more tied up you become. I love his common sense around bike riding. We've spent a fortune on petrol in the past ten years. I totally love his emphasis on nature play for his boy and not on material toys. He's living the life.
I love the living off compounding interest idea. We have several homes and it makes me feel very tied down. Paying rates, organising maintenance, finding and keeping good tenants. I'm totally going to get them to a point where they've made me my money, then sell them, stash the money and live on the interest. Then I can jey set to Italy without worrying that a rates notice is due or a routine inspection is over due
I love that he is not about being rich and spending up. He's for living a nice and comfortable life on less. To me the more homes you have the more tied up you become. I love his common sense around bike riding. We've spent a fortune on petrol in the past ten years. I totally love his emphasis on nature play for his boy and not on material toys. He's living the life.
Weg sounds like there was a lot more to it than the homeschooling. I'm not saying it's best for every child or every family. Though I do dislike comments in regards to homeschooling which portray the parents as teachers and the children as social misfits. There are thousands of children that are failed by the school system every year. There are children who come out of school socially incapable and illiterate. I'm sure those parents you know who are on centre link payments and are drug users probably came through the school system themselves. I just think that for some families homeschooling is a fantastic opportunity to enrich your families life and to raise life long learners who are smart and independent, critical thinkers.
His blog is great. Whoever mentioned it, thank you. Totally inspired me to make some cuts and changes.
I love the living off compounding interest idea. We have several homes and it makes me feel very tied down. Paying rates, organising maintenance, finding and keeping good tenants. I'm totally going to get them to a point where they've made me my money, then sell them, stash the money and live on the interest. Then I can jey set to Italy without worrying that a rates notice is due or a routine inspection is over due
I love that he is not about being rich and spending up. He's for living a nice and comfortable life on less. To me the more homes you have the more tied up you become. I love his common sense around bike riding. We've spent a fortune on petrol in the past ten years. I totally love his emphasis on nature play for his boy and not on material toys. He's living the life.
I agree with your sentiments. Although having never been a landlord, only a tenant, I suspect that residential property investment is hard work and creates a lot of hassles. It is quite a difficult way to make money. The income is not truly passive. I can see why you would just want to amass a stack of cash and live off the income. Me, I am trying to amass between 2 to 3 mil.
Cash..............fine during low inflationary times like now, but what ya gonna do when we go back to the late 80s.........of near 20 % real inflation, where you 2 mill might become 500 k real quick.
ta
rolf
Good point Rolf. This issue has been nagging at the back of my mind for a long time. I expect to be accumulating 2 to 3 mil in cash within the next five years. At the moment, it is all sitting in a bank account. About 100k sits in super and 100k in shares. I am working like a maniac and watching the account grow on a daily basis.
Once I reach 2 mil, I would like to either stop working or ease back significantly. The challenge then is to how to allocate the 2mil so that it generates a 5% yield yearly for the rest of my natural life. I agree that holding it all as cash is no good. At the same time, I don't see holding lots of resi investments as a suitable alternative. As the previous poster has suggested, resi investments is a lot of work. Any suggestions?
Residential Property is some work but low risk. Even if vales drop , rents dont.
Where having cash only is very risky to me. If / when Aus $ drop say 20% then your $2m is worth $1.6m in buying power. That was the 80,s. car went up 50% in 5 years. Wages did not. Petrol the same.
Consider this scenario in your retirement.
Qu. Do you own a PPOR. IN all my experiences this a key require to an early retirement.
Regards Peter
Resi property is more than "some" work. It is too much "active" work for me when I want to retire. This is from my own observations and reading posts on this forum. Therefore, I don't think that I want to hold the 2mil in resi properties. Have considered commercial property as I believe from reading this forum that it is less work than resi once it is up and running.
I agree that having only cash is no good as it will not create a long term sustainable retirement, especially as I will only be in my early 40s.
I have owned my PPOR for about three years now when I bought it outright. Unless there is some unforeseen drama (accidents, time off work, getting married, having kids) , I would envisage that in the next five years, I would hold 2 - 3 mil in cash plus my PPOR worth 700k. The challenge is what to do with this net worth so that I can retire in my early 40s.
Any suggestions regarding allocating the 2 mil in cash to create a sustainable retirement, meaning perpetual 5% annual yield, without eating into the capital? Ideally the capital needs to at least keep par with inflation. I suspect that my scenario is somewhat uncommon for someone aspiring to retire ASAP.
MMM and Jacob of ERE love shares as their ER funding vehicle. Nothing fancy, just index investing like that offered through Vanguard and a 7% long term average return. Volatile, yes, but in the US at least you can pretty much have drawn down 4% of your nest egg starting any year over the last century and your nest egg would have survived the worst of the share market downturns. Oz is different, but not much so (see http://www3.grips.ac.jp/~pinc/data/10-12.pdf). Plenty more of this sort of stuff on MMM's site.
China,
What about some good value property with high yields. Some around 7% and good prospects of growth and rent increases. Combine that with some leverage and then keep saving into the offset accounts.
Even if the values increase in line with inflation it would be better than money int the bank earning 4%.
What about some good value property with high yields. Some around 7% and good prospects of growth and rent increases. Combine that with some leverage and then keep saving into the offset accounts.
Even if the values increase in line with inflation it would be better than money int the bank earning 4%.
Hi China,
Inflation is very dangerous for those that hold most or all of their savings in "cash" and "term deposits" even when retiring at 55 - 65. For those retiring much earlier than this inflation will really decimate cash savings. Hence the importance of investing in assets that generate income that is likely to keep up with inflation or better.
Of course resi property is obviously one option popular on this property forum. Commercial property is another. But like you I find direct investing in these requires more active work than I want in retirement. Hence overtime we have been progressively selling the Resi property and investing in conservative dividend paying shares with a large part of the portfolios invested in older style, diversified Listed Investment Companies (eg ARG, AFI, MLT, AUI ...). We also hold a couple of ETFs including one that invests in listed property trusts. In addition there are now no shortage of listed index funds (ETFs) focused on higher dividend returns. Along side this the sensible thing to do is always keep enough cash (LOC loans are also an option with increased risk) to cover a couple or more years living expenses. That way one is never forced to sell shares at inappropriate times to meet current cashflow needs.
Being a property forum this is likely to be the less preferred option for many here no doubt. But for us this has worked brilliantly and has seen our income increase dramatically in comparison to previous returns. Investing is now heading towards becoming truely passive with no tenant issues, repairs and never ending bills etc to deal with. And despite the GFC share dividends on average were maintained initially and have grown since. As to what the future holds -who knows? But I feel this approach is less risky than having inflation destroy his/her savings.
Other options are to devote a part of the portfolio to inflation-linked bonds. But certainly not now given the situation with the bond market.
Please note that this is not intended to start another shares VS property argument. There is a number of solutions to dealing with inflation but given that China wanted a more passive approach I thought that this could provide some food for thought.
Easy, spread it over AFI ARG and MLT.
I understand that in Australia, the only ETF that deals with the ASX 200 is the one by Vanguard. Is it safe to place most of the retirement nest egg with the one company? Or is it better to spread it between vanguard etf and direct investment in shares?
Many thanks for your detailed and well thought out post. I have no experience with LIC and various ETFs. What is ARG, AFI, MLT, AUI?
Could you please give me more info on this and how to get more info on this?
When you talk about high return ETF, are you referring to those listed on the Vanguard website?
Google them. They are ASX stock codes.
http://www.asx.com.au/products/listed-investment-companies-listed-investment-trusts.htm
Rooster
Some sources of info:
http://wamfunds.com.au/WAM/media/WAMMedia/LIC Research/Listed-Investment-Companies-Nov12.pdf
http://wamfunds.com.au//Wilson-Investment/Independent-Research-Reports.aspx
http://www.asx.com.au/products/managed-funds-product-list.htm# (Look under LICs & ETPs)
There is lots more information out there. But it would be worthwhile doing a bit of reading to familiarise yourself with these. But if you are lazy then the advice given previously by Trogdor pretty much sums up how simple this can be:
