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

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

I think if you can make a business out of property investing ie trading, developing, renovating then there is no timeframe, you don't need growth cycle though it makes life easier, in other words you have developed skills that are not p't dependent on C G

Mtr
 
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).

Mainly AFI (3.5% net yield), ALF (9.4%), ARG (3.6%), CDM (7.0%), DJW (5.7%), MIR (4.0%), MLT (3.9%), WAM (6.7%), WAX (6.2%).

+ MFF for international exposure - negligible yield but excellent growth.

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.

That was my line of thought 10 years ago, now completed.
 
If you wanted really low risk stuff, just buy PetroChina at from memory 4.5% net yield.

Largest company in the world (I think), and I don't think we'll stop using oil any time soon.
 
property is a very poor retirement asset, low yielding and high ongoing costs.

the simpler approach of cashing it in, buying a diversified portfolio of managed funds/shares/cash etc in super for most people is the best option.

it allows you to draw down on the income as well as the capital over your retirement.

as an example lets say you own a property worth $1,100,000 which yields you a rent of $50,000 pa. after rates, management fees, insurance, maintenance etc you bight be lucky to net $35K pa. having that property will exclude you from the age pension as well.

even though you have $1.1M in assets you would be on roughly the same income as someone who has nothing i.e. the full age pension of $33K pa.

in retirement its all about the income, no point having capital growth if you can't access it. Borrowing the capital growth from the bank via a line of credit etc isn't the greatest idea in my book.

agree with above, classic example of a middle class couple getting rip off by the system.
 
This is my back up plan!

There seems to be a lot of people doing that lifestyle ,,the cannondale national park is only just above 5 bucks a night ,so very cheap holiday if you like reading second books,and with no mobile access coverage no one can worry you, and unless you get a few backpackers on the drinks around the campfire you have the place to yourself during the week..
 
You were quite lucky with some of your timing Truong. A strong AUD, GFC but weak property market at times.

There have been hits and misses.

Property
The good: sold Brisbane in 2007 and 2010, Melbourne in 2010 and 2014.
The ordinary: sold Adelaide 2005-14.
The bad: sold Sydney 2010-12.
The ugly: offloading a vacant CIP.

Shares
The good: switching to LICs as the main strategy, holding tight during GFC and every aftershock, buying LICs when not yet trendy, buying at regular intervals including during GFC.
The bad: a short-lived attempt at picking individual stocks.

Structure
The good: SMSF, family trusts, transition to retirement, testamentary trust.
The ordinary: standard of advice by some financial planners.

Overall the result has been good. We're content and have no regrets.
 
This sounds like us, we get just under $50k net pa return from ips. Could all change if there was a need for a major repair on one of the properties one year, but how are shares more reliable? We have super anyway in addition so that seems like plenty of exposure to share market.

$1m plus in ips and shares and a bit of part time work for extra treats sounds like plenty for a comfortable life without slogging away for another 10 plus years on the treadmill and obsessing about where the next million is coming from, but each to their own.
 
There have been hits and misses.

Property
The good: sold Brisbane in 2007 and 2010, Melbourne in 2010 and 2014.
The ordinary: sold Adelaide 2005-14.
The bad: sold Sydney 2010-12.
The ugly: offloading a vacant CIP.

Shares
The good: switching to LICs as the main strategy, holding tight during GFC and every aftershock, buying LICs when not yet trendy, buying at regular intervals including during GFC.
The bad: a short-lived attempt at picking individual stocks.

Structure
The good: SMSF, family trusts, transition to retirement, testamentary trust.
The ordinary: standard of advice by some financial planners.

Overall the result has been good. We're content and have no regrets.


Truong,

To repeat a great quote I read somewhere recently:

Terminate the known, no regrets
Let go the unknown, no worries
Still and empty, the sage stays centered.
 
There have been hits and misses.

Property
The good: sold Brisbane in 2007 and 2010, Melbourne in 2010 and 2014.
The ordinary: sold Adelaide 2005-14.
The bad: sold Sydney 2010-12.
The ugly: offloading a vacant CIP.

Shares
The good: switching to LICs as the main strategy, holding tight during GFC and every aftershock, buying LICs when not yet trendy, buying at regular intervals including during GFC.
The bad: a short-lived attempt at picking individual stocks.

Structure
The good: SMSF, family trusts, transition to retirement, testamentary trust.
The ordinary: standard of advice by some financial planners.

Overall the result has been good. We're content and have no regrets.


Hi Truong, just want to say thanks very much for your candid posts - been very insightful.

I presume you don't have a mortgage as well ie $46K is for living expenses only? Also is that your only source of income and are you supporting more than yourself on that income?
 
Hi Truong, just want to say thanks very much for your candid posts - been very insightful.

I presume you don't have a mortgage as well ie $46K is for living expenses only? Also is that your only source of income and are you supporting more than yourself on that income?

No problem Highlygeared. We have an offset account that covers our PPOR loan so it's paid off in practice.

We have substantially more than 1M and the 4.8% that it generates allows the two of us to live quite comfortably. However for somebody with 1M and the same yield I assume they could feel a bit tight in their spending.

Please note that with the strategy that's discussed here, the retiree only uses the income component to live on, leaving their capital untouched and growing in line with inflation. This means these assets will still be there when they die.

Another aproach, preferred by those with a lower level of asset, is to gradually draw down their capital to increase their income. For example a couple retiring at 60 with a 1M balanced portfolio can expect a 55K income for 30 years. As their capital dwindles they have to rely more and more on the pension, and at 90 when it's used up they'll have only the pension to live on. Good figures on paper but beware of government rule change.

A very useful calculator here from ASIC for that scenario
https://www.moneysmart.gov.au/tools-and-resources/calculators-and-apps/retirement-planner
 
We have some higher yield ips paid off including one at just on 11% and a couple 8.5%. Without a boom or two it would have to take forever to be getting that kind of income from 'growth'ips bought today with 3% + yield. Not all growth ips actually grow much in at least the short to medium term when you take into account the huge buying costs and then holding costs. You really need the mix of high yield and expected growth.
 
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

I agree with you.

My plan is to have a large enough portfolio of sensible assets that I don't necessarily need to sell any down, but can rather live off the yield, accepting that said yield could be variable.

I'm aiming for $3M worth of income generating assets, in 2005 dollar terms.

More details here:
http://somersoft.com/forums/showpost.php?p=354929&postcount=24

It was a bit funny re-reading that. I wrote it in 2007.
 
I agree with you.

My plan is to have a large enough portfolio of sensible assets that I don't necessarily need to sell any down, but can rather live off the yield, accepting that said yield could be variable.

I'm aiming for $3M worth of income generating assets, in 2005 dollar terms.

More details here:
http://somersoft.com/forums/showpost.php?p=354929&postcount=24

It was a bit funny re-reading that. I wrote it in 2007.

Wait a sec, I'm playing devil's advocate here btw. Assuming you've paid off your PPOR you'll still have a sizeable debt against the IPs correct? And if you use the equity in those IP's to buy shares then essentially you're using borrowed funds. The initial net diff between those dividends and interest is virtually zero, so how is it funding your lifestyle (at least at inception)? It will take a 10 yrs or more ceteris paribus before that diff replaces your income?
 
Wait a sec, I'm playing devil's advocate here btw. Assuming you've paid off your PPOR you'll still have a sizeable debt against the IPs correct? And if you use the equity in those IP's to buy shares then essentially you're using borrowed funds. The initial net diff between those dividends and interest is virtually zero, so how is it funding your lifestyle (at least at inception)? It will take a 10 yrs or more ceteris paribus before that diff replaces your income?

My plan is to have $3M equity in the IPs, independent of the PPOR. I figure I'll borrow against the IPs, although not up to the maximum. I'll also still be in full time work when this happens, and expect somewhere from 5-10 years overlap. Thus I'll be able to reduce debt using cashflow from working, rents and dividends.

I'll be first to admit the strategy is not very specific. In reality I'll probably tweak it depending on how things are going.

When I wrote the original post I had wanted to retire at 45. I'll be 40 later this year, and really enjoy my job (and it's quite well paid), so no real need to get out just yet. If I can work for an additional 5 years to significantly improve my retirement position, then as long as I continue to enjoy work that what I'll probably do.
 
My plan is to have $3M equity in the IPs, independent of the PPOR. I figure I'll borrow against the IPs, although not up to the maximum. I'll also still be in full time work when this happens, and expect somewhere from 5-10 years overlap. Thus I'll be able to reduce debt using cashflow from working, rents and dividends.

I'll be first to admit the strategy is not very specific. In reality I'll probably tweak it depending on how things are going.

When I wrote the original post I had wanted to retire at 45. I'll be 40 later this year, and really enjoy my job (and it's quite well paid), so no real need to get out just yet. If I can work for an additional 5 years to significantly improve my retirement position, then as long as I continue to enjoy work that what I'll probably do.

Didn't mean to be cynical VY. I only asked the question bc I've pretty much arrived at your 'goal', and to be honest, am none the wiser about how to finish off the job from here and get the $150K pa passive amount - which ironically is the number I've aways envisaged for ourselves as well. Except that it includes rent/mortgage.
 
Didn't mean to be cynical VY. I only asked the question bc I've pretty much arrived at your 'goal', and to be honest, am none the wiser about how to finish off the job from here and get the $150K pa passive amount - which ironically is the number I've aways envisaged for ourselves as well. Except that it includes rent/mortgage.

It wasn't taken as a criticism HG, but rather a point to discuss a bit more widely. :) Please continue the discussion!

I guess I've been thinking about this for a while and have taken a position that I prefer yield to growth, and use the yield to pay down my loans. My growth hasn't been bad anyway, given location and reno's that I've done.

I guess the question is how to position yourself for the yield to be viable in retirement, and/or how to add assets that both diversify your portfolio and improve your cashflow.

Property is a great asset for building equity, but there are other options for the later phases.
 
I may be being too simplistic here but if you guys have $3m equity in property why spend so much time worrying about how you can make sufficient income from that to retire? Do you really need to leave the whole $3m on your death? Anyway, if you're in your 40s now surely by then the amount would have grown fairly substantially. Apologies if I'm misunderstanding but why wouldn't you just sell some and live off it, and leave the rest as you desire.

I guess it comes down to how much we think that we need..
 
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