Could i semi retire?

Discussion in 'Accounting & Tax' started by Hodge, 1st Jan, 2017.

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  1. Hodge

    Hodge Well-Known Member

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    Hypothetical question:

    I'm 32 and my wife is 31, 2 kids under 4 (no plans for more in the future). If we sell all our investments, pay all debts, taxes, etc, we will have approx $400K cash in the bank left and a PPOR fully paid off valued at approx $1.3m. (If we sell PPOR and purchase another PPOR much cheaper say around $800K we could release more cash).

    Based on these figures is semi retiring a possibility? (By semi retiring i mean working 4 days a week in a stress free environment, 9 to 5). We don't over spend and generally save more than we spend.

    My opinion is no as cost of living is only going to get higher and i'll have no other forms of income coming in. If i was older (50ish), kids were older than yes as kids would be nearing the end of schooling years and can look after themselves plus i would only be in retirement for approx 25 years and require less funds to see me out.
     
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  2. Sonamic

    Sonamic Well-Known Member

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    That's a question that only you can answer. A paid off PPOR helps, depends how much that 4 days a week would bring in and how frugally you can live.
     
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  3. EN710

    EN710 Well-Known Member

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    I tend to say yes depending on your expected spending ...

    $900k equity, say at 3% savings is $27k per year, plus say income from 4 days work is 75% of your current.
     
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  4. wylie

    wylie Moderator Staff Member

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    Working four days a week is not semi-retiring. If you want a less stressful job could your income from rents support the loans on the assets and allow you to hold them?

    If you could send the kids to public schools and avoid the private school fees and take a lesser paying job, hold your assets and be happy, would you do it?
     
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  5. twobobsworth

    twobobsworth Well-Known Member

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    Kids are expensive little buggers, I say no not in Australia, overseas though.....
     
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  6. Hodge

    Hodge Well-Known Member

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    True, i guess some people could make it work whilst others would struggle. Lets say 4 days a week brings home $600. Not really enough for cost of living.
     
  7. MTR

    MTR Well-Known Member

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    I think its part time work:)
     
  8. Hodge

    Hodge Well-Known Member

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    Don't think i would be able to hold down the assets with a lesser paying job. My investments are all negative geared but capital gains are great and high as they are all located 15km from CBD.

    Don't get me wrong i like my job and don't think i would want to retire now but good to know i have a plan B if one day i wake up and just want to slow down.
     
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  9. Barny

    Barny Well-Known Member

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    Can easily do it. Depending on what you need a year.
    You would have 900k in total if you bought a cheaper place. 900k can generate bout 5% return, 45k per year.
    4 days a week can bring in additional???

    Can be done easy.
     
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  10. Hodge

    Hodge Well-Known Member

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    I think you are right. Perhaps i used the wrong word and should have written "cut down from full time employment to part time".

    I would be bored out of my brains if i was retired - hence semi retiring.
     
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  11. MTR

    MTR Well-Known Member

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    It can work if you can still keep investing, growing wealth and use some of your equity, in other words LOE to cover the short fall replace the short fall every year with money made from deals/investments.

    However, with markets close to peak in Australia it may be difficult moving forward and you would need to be an active investor ie developer, renovating etc..

    Also the other issue is loans, you could go lo doc and one deal pa I guess. If you could generate $50K pa to replace income from a deal a year it could work. Is this an option?
     
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  12. Hodge

    Hodge Well-Known Member

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    Its finding the 5% returns is the problem. I would want something low risk like a term deposit.
     
  13. Marg4000

    Marg4000 Well-Known Member

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    A lot depends on how much you can earn working part time. This will govern how much you need to earn on investments to cover expenses. At such a young age you don't really want to be dipping into capital which will be losing purchasing power over the years.

    You will have to do both short term and long term theoretical budgets.

    How will you provide for your retirement? This is the biggie as even today around $1m is needed for a comfortable retirement if you retire at around 60.

    Does your wife intend to return to the workforce when the children are at school?
    Do you envisage private schooling for your children?
    Are your skills suited to part time income?
    As a trial, can you cut back to 4 days a week at your current employment?

    And if you are unhappy in your present employment, can you get another job in your field? Or retrain?

    These are your prime earning years, and the fact that you are even thinking of getting out at 32 rings alarm bells, unless you can do extremely high paying consultancy contracts or intend to start your own business.
    Marg
     
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  14. WattleIdo

    WattleIdo midas touch

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    I say yes, you could retire.
    Yes, you could semi retire - take a year off? 6 months?
    Yes, easily go to part-time work or full time where you only work 4 days a week. If you're going to do part time then do 3 days a week because it 's just so much better and you'll find the difference in pay not so great etc. Ease it down, though.
    You don't need to sell up; just get yourself neutral or positive and take it from there.
    The only thing I would say is, especially at your age, work does help to take off some of our rough edges and forces us to take responsibiluty for our own foibles. It's also a discipline and expects a certain standard from us.
    But because of the slow economy, I think taking a break or slowing down is the best thing to do right now! :) If you can't stop and smell the roses, you're missing out. You're in a great position.
     
    Last edited: 1st Jan, 2017
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  15. Westminster

    Westminster Tigress at Tiger Developments Business Member

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    I would say yes it's possible. I'm assuming that the 4 day a week job would be a 'no brainer' type job and therefore less money?

    I would look at it from a tax perspective and absolutely time the selling of assets. I'm not an accountant but I think if you stopped working at the end of a financial year then sold in the next financial year and didn't take a job but lived off some of the gains that the CGT you'll pay will be significantly less than if you sold during the financial year before when you had career income.

    Could you and your wife work 2 days each to really keep tax down?

    How much money do you have in your Super account to fund retirement when you reach 65-70?

    If you can support the family on $40k which might be part time job plus interest from term deposit of the cash then go for it if that is ok for your lifestyle
     
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  16. DaveM

    DaveM Well-Known Member

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    To add to this, you could also prepay interest on assets to be disposed in the prior tax year so the interest can be deducted against the higher income
     
  17. Stoffo

    Stoffo Well-Known Member

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    Am older, and have had similar thoughts :rolleyes:
    I have decided long ago that working for an hourly wage will never get me there, hence my property journey :cool:
    Once I have enough investments that are self supporting edging into positively geared I will look at winding back actual hours working, and should have enough income to live comfortably. :)
    Best laid plans and all that o_O
     
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  18. Hodge

    Hodge Well-Known Member

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    Good suggestion and have thought about this. I am very hands on so renovating for profit could be an option. I would probably do this with a partner to mitigate some of the risk an cost.
    Lo doc loans would be my only option as borrowing would be a lot harder on such a low income.
     
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  19. Hodge

    Hodge Well-Known Member

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    That's a a good point about tax - if my wife and I both work part time and earn under $18k we wouldn't pay any tax yet still earn around $30k.

    Unfortunately only about $2k in super.
     
  20. Hodge

    Hodge Well-Known Member

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    This my main concern. My worry is that i could make comfortably to say 50 but then funds may dry up and back to square one. I will be forced to go to the work force at an older age.