Advice sought from forum elders/successful/experienced investors on strategy Re: 10 year plan Currently Late 40s, Aiming for growing passive income and option to retire in 10 years. Super not accessible for 17 yrs. 350k currently. Asset base 2 properties LVR 40% 6 Figure Share portfolio - options to sell out over next few years and move into less speculative end of market Current personal thoughts re 10 year plan: Use a two pronged approach - property and shares. Build investment property portfolio in parallel using equity available in current properties. Rent for next 10 years Test personal value investment strategy with super money within industry fund for next few years Then transition lump sum gain into same strategy The best strategy is the question given I will have a reasonable starting kitty. LICs ETFs Vs active value investing aiming for +10% pa Any ideas/thoughts welcomed?
If you are late 40s you should be able to access super at 60 not in 17 years. You may be confusing this with the pension age.
JCD, You post has a lot of un-answered questions: What is your required passive income to retire? What is your current savings rate from income? (Ie. How much extra investments can you add from savings?) Presumably your investment properties are cash flow positive (at 40% LVR), how much by? How about any future investment properties you buy? Will they be cash flow positive as well! You say existing share portfolio is six figures - that’s a very large range. Is it safe to assume it’s in the lower six figure range rather than close to $1m? What’s your serviceability like? Regards, Jason
Hi Jason, Passive minimum target for 10 year timeframe -80k each myself and my wife. Then continue to grow hopefully. Max contribution to super pa currently. Small Excess income was going to go to neg geared IP. DRP for share portfolio. Property portfolio would be neutral with additional purchases I think, not quite worked this out yet as have not refinanced them yet. Seven figures it should have read for share portfolio! Use round 1M as starting base for share portfolio. serviceability not huge with large family and one income presently. hope that makes more sense. Appreciate the comments. JCD
What you buy is going to depend greatly on what you can borrow now, and your exit strategy when it comes time to retire. There's a bit of fine tuning that needs to happen to get really clear on strategy - you need to get really clear on the role each asset is going to play when the time comes to ditch the day job.
Unless I am misunderstanding, you are saying you have a $1m share portfolio now with a target retirement income of $80k? If you took the $1m now and put it into old school LIC's paying about 5.6% grossed up yield you'd be getting $56k per year minus a token amount for tax (assuming you split the shares equally between your wife and your name and had no other income). That's 3/4 of your target already! If you can drawdown on your existing loans you could look at using this for higher cashflow investments (shares, commercial property through reit/upt etc) and get some extra income there. Buying more stock standard residential property is not going to help the cashflow retirement income in the short term. You also mentioned renting for the next 10 years - what afterwards? Are you planning on owning your own home in retirement? Regards, Jason
There seems a mismatch between assets outside super and inside. This is inconsistent with a retirement strategy and using low tax rates to assist compound growth etc now and also in retirement. Unless you like overpaying tax of course.
Hi Jason, I was aiming for 80k each myself and wife. So really looking for best way to grow the share capital base to earn that sort of passive return by mid to late 50s. The property side of things would be a longer term outlook for later down the track passive rental returns to add to overall annual payments from shares, super and rent combined post 65 and onwards. Sorry I should have mentioned the property strategy was aimed at longer timeframe through to standard retirement ages and beyond. Have no definitive plan for home, could move back into current home after renting out for next decade or purchase outright later assuming capital base is large enough post 60-65 age! Any ideas on best approach for ppr? In overall plan? JCD
Hi Paul, Would you mind elaborating slightly. Are you inferring I would be better to place a lump sum into my super from the current share fund outside of super, in the interim between now and 60’s as it would be more advantageous for growth ? JCD
Super is essentially a tax haven. 15% tax now can allow for a lot of extra compounding to happen. Also potentially 0% tax later including CGT.
how much of your current lending is not tax deductible ? your direction is clear, but without knowing resources and risk profile with more numbers its hard to provide any path . Id look hard at getting specific tax and credit advice. ta rolf
Hi Rolf, Currently one third of lending is tax deductible. When I rent personally, my current PPOR will also become a rental so 100% will then be tax deductible. 430k all up lending. As for super, an in specie distribution still triggers cgt as far as I understand. So to transfer my share fund or part thereof into my super I can see would be a good way to minimise tax going forward after selling first to implement the long term value investing strategy . Assume this is what Terry and Paul were inferring above? My risk profile is I would suggest “moderate” as I am a little closer to retirement than I like to imagine!! JCD
Hi Terry, Are you saying, outside of all living expenses and mortgage etc, one's best bet would be to load extra funds into super because you do not pay tax on any of it?
