You "Only" Need $1m to retire comfortably.

I know of several in various states of retirement. Pensioners with own home, living quite well (no other assets), self funded retirees (oh, those ones with $1m in super + several $100,000's pa from rent) - they're doing alright but complaining about low interest on term deposits ;)
 
So perhaps we should be asking has anyone retired on $1million, assuming primary residence excluded, no other debt and is it working for you?

Yeah I know a few.

Some have their cash mainly in shares, some in private businesses and some in commercial property. can't think of any that are getting majority of their income from resi property, why settle for 3-4% net returns when income is the goal
 
can't think of any that are getting majority of their income from resi property, why settle for 3-4% net returns when income is the goal
Assuming they bought their property today.
If they bought a million in property 10 or more years ago they'll be getting a lot better than 3-4%
 
Dec, the yield calculation is based on net return / pv not purchase. Basing return on purchase cost may feel good but you'll be looking forever to find another residential property with a 25% return.
 
Dec, the yield calculation is based on net return / pv not purchase. Basing return on purchase cost may feel good but you'll be looking forever to find another residential property with a 25% return.

But the reality is that those that bought 10 plus years ago are getting big ROI, you said so yourself.

but you'll be looking forever to find another residential property with a 25% return.
You must think people are pretty silly if you think that.
I've been sourcing and buying the same deals as I did back then, something that leaves me not to much out of pocket in the short term and has a value add upside and the knowledge that over time it'll be giving us returns like the ones we bought 10+ years ago
 
I know of several in various states of retirement. Pensioners with own home, living quite well (no other assets), self funded retirees (oh, those ones with $1m in super + several $100,000's pa from rent) - they're doing alright but complaining about low interest on term deposits ;)

Yes, I know several who are living just on the pension with virtually no investments. See to be doing alright too.
 
So perhaps we should be asking has anyone retired on $1million, assuming primary residence excluded, no other debt and is it working for you?

We're currently retired with > 1M of investible assets.

46% in shares yielding 7.1% (incl. franking)
31% in property yielding 3.2% net
23% in cash and fixed interest yielding 2.5%
Overall yield approx 4.8%.

That would be tight if we had only 1M. We'd have to eat into the assets or take a bit more risk but fortunately we're not in that position. This is what Glenn Stevens alluded to when he said the next generation of retirees will find the price of retirement income streams much more expensive than before.

Looking 1 or 2 decades ahead we're planning for a lower overall yield if the mix is left unchanged. Our properties will age and require more maintenance while yields could drop due to lower population growth. Fixed interest will remain low and could go lower. Less profitable Australian companies will affect share dividends while the chase for high yields could get the market off balance.

In addition there are regulatory threats on the horizon with possible changes in super tax, franking credits, pension rules, NG, CGT etc... as governments look for more money everywhere. Not being pessimistic here but you need to cover all bases BEFORE you lose your ability to earn an income from your labour. As I said, your views about market risks will change markedly when you're actually in retirement and only getting older.

You should take people's boasting with a grain of salt. There are very, very few retirees with no worries whatsoever about their finances.

As a general rule in my opinion, either you aim low in order to get the pension, or you should aim really high to be free of government interference. The middle range is where uncertainty lies.
 
We're currently retired with > 1M of investible assets.

46% in shares yielding 7.1% (incl. franking)
31% in property yielding 3.2% net
23% in cash and fixed interest yielding 2.5%
Overall yield approx 4.8%.

That would be tight if we had only 1M. We'd have to eat into the assets or take a bit more risk but fortunately we're not in that position. This is what Glenn Stevens alluded to when he said the next generation of retirees will find the price of retirement income streams much more expensive than before.

Looking 1 or 2 decades ahead we're planning for a lower overall yield if the mix is left unchanged. Our properties will age and require more maintenance while yields could drop due to lower population growth. Fixed interest will remain low and could go lower. Less profitable Australian companies will affect share dividends while the chase for high yields could get the market off balance.

In addition there are regulatory threats on the horizon with possible changes in super tax, franking credits, pension rules, NG, CGT etc... as governments look for more money everywhere. Not being pessimistic here but you need to cover all bases BEFORE you lose your ability to earn an income from your labour. As I said, your views about market risks will change markedly when you're actually in retirement and only getting older.

You should take people's boasting with a grain of salt. There are very, very few retirees with no worries whatsoever about their finances.

As a general rule in my opinion, either you aim low in order to get the pension, or you should aim really high to be free of government interference. The middle range is where uncertainty lies.

It is a very realistic perspective of retirement, but your options must be much brighter than many Australians. Having familiarity and connection with Vietnam, your scope of comfortable retirement with all the amenities required is greater.

Most people who have earned their wealth to retire should know that in Australia retirees like tall poppies are considered fair game. Depending on someone else to look after your financial wealth is a temptation too great for that someone to live it up at your expense.
 
Hi Truong

Thanks for showing us some real life figures.
Assuming someone had $1mil invested in the same proportions as that we would get
$460,000 in shares generating an income of $32,660
$310,000 in property generating an income of $9,920 (possibly much less due to holding costs so say $7,440 assuming 25% of the rent is eaten up)

$230,000 in cash generating an income of $5,740

Total $1mil generating $48,320 or $45,840
This figure would go up with capital growth on the property and shares (or down) but the cash component wouldn?t.
 
It is a very realistic perspective of retirement, but your options must be much brighter than many Australians. Having familiarity and connection with Vietnam, your scope of comfortable retirement with all the amenities required is greater.

Our future is firmly here in Oz. There's too much aggro with our Vietnam links due to the injustice we suffered and the depravity of the ruling class. We're still travelling there from time to time to do charity work despite their best efforts to obstruct us unless we grease their bottoms. :eek: :D
 
Yes, I know several who are living just on the pension with virtually no investments. See to be doing alright too.

Was talking to an older then me gentleman up in the Cannondale National Park last week,had a good poptop camper solar gas annex,thats all he does travel from national park too national park, and he was telling me he has about 42 k with his house rented to play with each year and he was saying for a drinker maybe homebrew from the taste,he could not spend it all so there is hope out there..

images
 
Hi Truong

Thanks for showing us some real life figures.
Assuming someone had $1mil invested in the same proportions as that we would get
$460,000 in shares generating an income of $32,660
$310,000 in property generating an income of $9,920 (possibly much less due to holding costs so say $7,440 assuming 25% of the rent is eaten up)

$230,000 in cash generating an income of $5,740

Total $1mil generating $48,320 or $45,840
This figure would go up with capital growth on the property and shares (or down) but the cash component wouldn?t.

Your figures are about right Terry, except that the yield I quoted for property is 3.2% net of all expenses. So yes, 1M would generate around 48K.

In our case the income flow is quite stable regardless of asset prices going up or down. Resi rents and fixed interest are almost "guaranteed" while our shares are mostly LICs with consistent dividends even in times of crisis.

Another comment I'd like to make is that with 310K of property you can only have 1 fully paid off IP. I tend to think that 1M is too small a portfolio for owning unencumbered property (either residential or commercial) because of risk concentration.
 
And another comment. With this particular mix you can probably increase the weight of shares to generate a better income.

The rationale is that with 230K in cash you have more than enough to cover 3 years of living expenses and therefore you're well insured in case of a sharemarket slump.
 
Just to point out the obvious, with interest rates so low there is no reason to own unencumbered property, even in retirement.

While there is a definite retirement driver to reduce risk, there is no risk free investment available to anyone in retirement or at any other time. Reducing LVRs and improving servicing is of course prudent when you don't have earned income but there is no magic pudding associated with zero debt by itself.

It's not entirely about income either for that matter - the more I think about it the more I come to the conclusion that letting yourself get caught up in de-risking as much as possible to attain a certain level of "safe" income is likely to be both self-limiting and counter productive. It certainly would have been a very poor strategy over the last twenty years or so on the property side and I can't see any reason for that to change.
 
R & r

Hiya

Many people have the idea that the game is over once retirement starts....say at 60 or 65 years....

Does anyone out there agree with me that beyond that age, there is still another 20-25 years of investing cycle ? in other words it is not only about yield at retirement...it is about capital growth too....which in turn should feed into more yield again...

Maybe i am not good at expressing myself....gosh..i sound muddled even to myself, don't i?:D
 
Hiya

Many people have the idea that the game is over once retirement starts....say at 60 or 65 years....

Does anyone out there agree with me that beyond that age, there is still another 20-25 years of investing cycle ? in other words it is not only about yield at retirement...it is about capital growth too....which in turn should feed into more yield again...

Maybe i am not good at expressing myself....gosh..i sound muddled even to myself, don't i?:D

That is right. Property and shares will still be growing and could be sold off if need be.

And retirement doesn't mean you will never earn another cent for the rest of your life either. Some develop money making businesses, some inherit, some get gifts from children etc.
 
Was talking to an older then me gentleman up in the Cannondale National Park last week,had a good poptop camper solar gas annex,thats all he does travel from national park too national park, and he was telling me he has about 42 k with his house rented to play with each year and he was saying for a drinker maybe homebrew from the taste,he could not spend it all so there is hope out there..

images

This is my back up plan!
 
Virgo and HiEquity, you have a valid point, a better balance needs to be found between capital growth and income, however the devil is in the detail. Look at these 3 scenarios:

Scenario 1 (as above): one 310K unencumbered property producing a net yield of 3.2% or $9920 pa.

Scenario 2: Leverage the same capital over 2 properties worth 310K each @ 50% LVR.
Loan per IP: 310K x 50% = 155K
Interest: 155K x 4.8% = $7440
Net yield: $9920
Income per property: $2480
To generate the original income you'll require 4 properties and a total equity of 620K (twice than scenario 1).

Scenario 3: Leverage the same capital over 3 properties worth 310K each @ 66.7% LVR.
Loan per IP: 310K x 66.6% = 206.6K
Interest: 206.6K x 4.8% = $9917
Net yield: $9920
Income per property: $0.
No amount of properties will generate the required income.

As one can expect, the more you leverage, the less your income per property will be, the more properties (and capital) you will need... and you're back with the original issue which is the need for a bigger asset!

If you want to focus on CG the best way to do it really is to have enough income outside of property so that you don't need the property income initially. But then the question needs to be asked: why are you waiting until retirement to get growth on your IPs? Wasn't property investment meant to do that for you already?
 
We're currently retired with > 1M of investible assets.

46% in shares yielding 7.1% (incl. franking)
31% in property yielding 3.2% net
23% in cash and fixed interest yielding 2.5%
Overall yield approx 4.8%.

Thanks for sharing Truong! Just wondering what your share holdings are to be generating 7.1% gross yields.

All recent purchases I've been making on the large-LICs are yielding 4% or sub-4% (net yield).

High level plan for me is to gradually sell down the majority of my property portfolio to shift the weight towards shares for tax-effective income, and keep 1, at most 2 unencumbered properties.
 
Back
Top