Can you retire on 1mill?

Discussion in 'Investment Strategy' started by Cmelderis, 13th Feb, 2020.

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  1. thydzik

    thydzik Well-Known Member

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    Ok, I re-read what you did.

    You need to take into account the pension asset limit, its not the full $1m, since the pensioner would be able to hold $394,500

    Makes it $46.4k or $10k better off.

    The present value of that addition over 30 years is $127,787. Whilst with the pension you got to spend $605,500 upfront.
     
  2. monk

    monk Well-Known Member

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    Unless I'm totally mis-understanding what you're saying here, but your figures are very wrong.
    A couple,own their own home can have assets of $863,500 before the pension & benefits are cut out completely. A non-home-owning couple can have assets of $1,074,000 before the pension & benefits are cut off.
    A single home-owner can have assets of $574,500 or a non-home-owning person can have assets of $785,000 before pension & benefits are cut off.
    The limit you are referring to is likely the amount where the pension, not the benefits, start to reduce for a couple, less for a single.
    To you want to check this, Google is your friend.:). Though as I said I could be mis-understanding this.
     
  3. thydzik

    thydzik Well-Known Member

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    I haven't looked into singles, all couple figures.

    Couples pension decreases by $78 for each $1,000 assets equal to 7.8%.

    No investment will return you 7.8%. so better to reduce the assets.

    I'll calulate the upper bounds when I have a chance.
     
  4. truong

    truong Well-Known Member

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    OK, let’s get practical. Assume a couple with a paid off home.

    A good strategy needs to be sustainable and $1M is not a lot to defend.

    If based on ETFs as it’s been discussed, it would need two things: (1) a cash buffer to cover for lean dividend years that must be replenished during good years, (2) a cash reserve, not likely to be replenished once used, to cover for large possible events that must be planned for e.g. home repairs, car replacement, health issues... Therefore out of $1M, maybe 800K or less is available for investment.

    Assuming 4% yield, that’s 32K pa. Disregard franking because it could well be abolished over the course of the retirement.

    With 32K we’re in age pension territory. A much better strategy would then be to:
    - restructure assets to get under the pension cut off limits, say 800K
    - put the whole lot into a large super fund
    - take advantage of all benefits available to pensioners
    - slowly withdraw capital to supplement income while increasing pension, with the aim to deplete capital by the age of, say, 90.

    With all the above it’s possible to achieve 56-60K pa. In later years that would consist of about 36K of pension and 20-24K of super withdrawal. Many people would have a very happy retirement with that amount.
     
    Last edited: 20th Feb, 2020
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  5. Lacrim

    Lacrim Well-Known Member

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    If this is done together with removal of negative gearing say, or more property taxes, I have NFI what would make a sound and realistic early retirement plan.
     
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  6. SatayKing

    SatayKing Well-Known Member

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    LOL. I know what you mean.

    I based my planning on no GST being introduced and the Company Tax rate remaining at 36% but the rotters changed it to 34% and again to 30%.

    Ya just have to roll with it I reckon.
     
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  7. Perthguy

    Perthguy Well-Known Member

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    Scott Pape tells why you don’t need $1 million to retire

    Rule 1: You must have the banker off your back
    This strategy only works if you retire debt-free … as in no mortgage …

    Rule 2: Nail your number
    You can’t retire until you’ve nailed your retirement number as a minimum (more money is better): $250,000 in super for couples and $170,000 for singles.

    Here's how it works:

    You’re getting an Age Pension of $36,301.20 (per couple) a year, indexed for life. And you’ve got $250,000 in super, which will allow you to draw a tax-free income of $12,500 a year.

    Rule 3: Never, ever retire
    Once you reach pension age, you’ll not only be able to draw a tax-free pension from your super, but in addition a couple can earn up to $28,974 each without paying a cent of income tax (singles can earn $32,279 per year).

    Yet, your adviser says, ‘You’re a winner, you don’t have to work another day in your life’.

    Barefoot says, ‘Work anyway, even if it’s a day a week’. The biggest mistake you’ll make with your retirement is to give up working.

    You and your partner each work just one day a fortnight to bring in a combined $15,600 a year, completely tax free. (You can both earn $300 per fortnight – as an employee or via a side business – without paying tax or affecting your pension.)

    Final numbers:
    Age Pension: $36,301.20
    Super pension: $12,500
    Work: $15,600
    Total: $64,401.20

    Scott Pape tells why you don’t need $1 million to retire

    I actually think $1,000,000 in assets is the opposite of a 'sweet spot'. You will be penalised for going over the Age Pension assets limits but not earning enough returns on those investments to be much further ahead (if at all) financially.

    Another article compares someone with a super balance of $400,000 at retirement vs $800,000 at retirement.

    Weirdly, one of the outcomes is that the total income (Age Pension and income from super) will actually be higher for the person with $400,000 of super than for the person with $800,000 of super during the first six years of retirement. And it will be more than $10,000 higher in the first year ($52,625 versus $42,336).

    In year seven, the person with $800,000 of super will enjoy around the same income as the person with $400,000 of super, after which the person with $800,000 of super will progressively enjoy a higher and higher amount of total income.

    However, it will not be until the 20th year that the person who starts with $800,000 of super will reach a point where their income exceeds that of the person who started with $400,000 by $20,000 – the amount equal to the additional $20,000 they withdraw from their super every year. This only occurs once their super balance falls low enough so that they qualify for the full Age Pension.

    If you look at the total income each person received during the first 25 years of retirement, the person who started with $800,000 of super will only receive an extra $242,000 of income compared with the person who started with $400,000 of super.


    The sweet spot, super failings and where to next
     
  8. Beano

    Beano Well-Known Member

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  9. euro73

    euro73 Well-Known Member Business Member

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    might require a little discipline, but I agree it’s probably manageable :)
     
  10. Scott No Mates

    Scott No Mates Well-Known Member

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    I think that I'd struggle :D
     
  11. Beano

    Beano Well-Known Member

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    To spend $200m pa ? :)
     
  12. MTR

    MTR Well-Known Member

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    Ouch inflation
     
  13. Squirrell

    Squirrell Well-Known Member

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    Also. You could get your kids to give you cash each week if they are high earners so they can get the house when u pass. 20k per year wouldnt be noticed by ATO.
     
  14. Icarus

    Icarus Well-Known Member

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    I'm a bit late to the party on this thread, but good 'ol Daily Mail forgot to put the comma in the right spot for the price - and didn't do any fact checking first...

    Average price in Dolphin Heads is currently hovering just under $600K.
    It's a beautiful part of the world, with multi-million $ beachfront houses e.g. https://www.realestate.com.au/sold/property-house-qld-dolphin+heads-136214662
     
  15. Trainee

    Trainee Well-Known Member

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    The problem with playing it 'safe' and retiring with no debt is you avoid the damage from high interest rates, but don't have a hedge against inflation.
     
  16. Colin Rice

    Colin Rice Mortgage Broker Business Member

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    Easy done with a 5% return and kicking back in Pattaya or as already suggested by a 5 bedder and rent the rooms out and spend 50% in Oz and 50% elsewhere.
     
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  17. qemist

    qemist Active Member

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    True. A guy on /r/fiaustralia retired to Bali with under 500k in his 20s. He still works part time online though he says he doesn't need to. AUD 2,000 per month is said to be adequate to cover living expenses in Pattaya by those who know about these things (I've never been there!), so $50,000 a year would be enough for an additional 295 barfines per year. Retiring seems much easier if you're male and single.
     
  18. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

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    I've been living in Pattaya for 6 months now with my wife and we seem to be spending around $2,000 per month on average not including one off expenses such as gardens, pots and pans etc
     
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  19. Gen-Y

    Gen-Y Well-Known Member

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    That is not too bad....
    Can you break down in % which area you spend on?
    The 3 basic cost - Accommodation, food, and transportation.
     
  20. Lacrim

    Lacrim Well-Known Member

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    You could, but there's always that trust issue (despite them being your kids).