Apparently you need 2mil worth of IP for a comfortable retirement. Is anyone there yet?

I think the heading of the thread is a little ambiguous.

 

Yes, your primary residence would not be included, purely assets that generate income

MTR

 

Reading this thread...and having a grin.......as I discussed this exact topic only this weekend...

There is a simple formula of what you need...that I developed using the 4% rule and other factors.

Here is how you can work out what you need and the key rules:

1. You need your PPOR paid off for the formula to be . This will not form any part of your asset base for generating income

2. To work out what you need as an asset base. Use the formula: desired income divided by .04 (4%). So if you need $50k annum to live comfortably...then you need $1.25m in investable assets.

3. The above formula assumes these assets are invested in assets like shares generating 5-7% per annum. If you are reliant solely on property add 20% to the asset based. So the $1.25m you will need $1.5m in fully paid property generating about 4.5-5% per annum gross.

4. If you are under 50 then you need to add another 20% to the asset base for every 10 years to ensure that you don't eat into the capital. So at 40-50 years of age...you need 20%...30-40 40%...etc.

5. Super is a bonus...if you have 500k in super and under 50...you can reduce the premium on point 4 by 20%

NB: The above assumes 2 people splitting income for tax purposes...

 

Great stuff Sash.

So this is assuming that the ongoing expenses are taken out of your pension/income? Or is this 20% premium added to the IP step?

(So step 1 would be - determine all your living and investment costs, including maintenance costs of IPs etc to determine passive income required)??

 

Yep...step one is correct....assume that you need 35-40% income for property just for maintenance and other expenses.....

 

I am wondering if retiring on partial equity withdraw combine with rental income is still an option this day and age. for example, say if I need 100k pa and I only have 50k of rent so I extend my loan for another 50k pa.

 

This millennial plans to retire at 35 instead of owning a home in Sydney -- here's how he plans to do it

this lad believe @ $40k per annum..

 

A little too simplistic I think. What about rent? that would more than half of that amount not to mention rent increases. If they ever have kids than they will need to double that. If they decided to live in a developing country then thats sufficient

 

5 Living Off Equity Strategies to Speed up Retirement 5 Living Off Equity Strategies to Speed up Retirement

 

he did say in south east asia or south america, i agree with you in a cheaper country yes he can do it.. but developing country does not equal cheaper than australia.

 

Thanks fresh reminder Terry, I have read through it before and good to read it again. Still got a long while to go for me and lots can happen between now and then. Hopefully I will remember revisit this subject a much closer date.

 

Developing country does generally equal to cheaper. I am struggling to found a developing country that has higher cost compare to Australia, this means also included big cities in China as almost everything is cheaper except coffee, realestates(buying, renting is cheap) and dairy products.

 

@KinG3o0o here's an example Cost of Living Comparison Between Sydney, Australia And Shanghai, China It's perhaps a city that is closest compatible to large cities in developed nations and look at how much cheaper in almost everything.

 

Seen anyone adequately and sustainably LOE?

 

I haven't. I have seen some who have use a temporary LOE for retiring early or even a mini retirement, but not long term. I don't think it is really possible now.

 

LOE was my plan initially. But it became pretty obvious it was not going to work in the modern finance environment, unless you're incredibly low lvr, leading to large positive cashflow.

But if lvr is that low, returns are quite poor for capital city property - so decided that selling down slowly and building dividend income from shares would be a much more sustainable and higher, long term retirement income.

End result is a simple approach not reliant on banking policies, no debt (eventually), strong income and no unexpected expenses and income increasing faster than inflation.

 

He’s not a lad, he is a kid with no real life experiences.

I wouldn’t be modelling myself on his strategy. He will be on welfare in years to come.

My apologies for being so B&B (blunt and brutal).