Ideal Passive Income Portfolio for Retirement - advice from forum experts

Should have mentioned. 500 @ $1.19. Brokerage $80. Sheese how times have changed. Still seems like yesterday to me.

 

I won’t bother going on about Super but having a Tax Free Pension when 60 from at least $3.2 Mil if there is a spouse is still useful play money. That’s around $180K pa tax free from Shares.

As for ourselves we’re retired, I’m 57 and wife 54. Our retirement income is about 90% from the sharemarket.

But sticking to early retirement it sounds like a decent reasonably “reliable and consistent” income stream is desired. And although growth is important an inflation protected income now rather than waiting for high growth to deliver in the years ahead is likely preferred?

If the allocation to shares is only going to be 10% of your overall portfolio then I’m not sure if International equities is worth having given the limited impact of diversification, significantly lower income and loss of franking credits. And Hedged International Equity Index Fund VGAD has terribly unreliable and inconsistent distributions having missed distributions at times for up to two years.

As for Bonds they pay terrible income. I avoid. Some Indexers will likely disagree.

So given LICs unlike Index Funds are able to smooth dividends and are just as cheap fee wise I’d probably just split it between ARG and MLT. Simple as. Including franking credits the dividend income will likely be around 5.5 to 6.0% in a normal market.

As usual I’m not able to give advice. Just my thoughts.

 

Yeah, go figure.

And these are the guys running the country .

 

Bliss! I'm sure you were not agonising over nta discount premiums, 52 wk high and lows and top 20 companies in the portfolio etc etc? Love reading these old war stories!

 

Yes..I was being flippant about Super...unfortunately I can only contribute 25k per annum. With some luck and growth I will hit $1m. But agree having 50k tax free is a real attraction.

The 10% of my overall portfolio (includes property) so planning to invest $1-$1.5m. I am hoping to generate about 50-75k. Basde on your thoughts that is achievable...whilst tracking to inflation. The remaining dollars would come from rents....I am planning to do this as I feel rents are not as stable as dividends.

When you refer to LICs ARG and MLT..do you mean Argo and Milton. Sorry stupid question..I know...

 

Super non-concessional Contributions. Potentially up to $600k can be put into Super in one year. Add another $25k each concession contributions. In fact across two FYs a combined $900k could be contributed by a couple if caps allow.

Yes Argo and Milton will easily give you that income if you can take some advantage of franking credits.

If they interest you read these research reports. If you like like what you see then they might fit the bill. It’ll be your decision then based on some useful research other than taking other’s word for it. Gotta be happy with what you invest in. These two suit us and make up a decent chunk of our overal portfolio.

ARG:
https://livewiremarkets.com.au/wires/argo-upgraded-to-highly-recommended-by-iir

MLT:
https://www.milton.com.au/files/mlt_report_aug_2016.pdf

 

Those who do invest via shares have a tendency to type in shorthand. ARG instead of Argo Investments Limited (ASX Code: ARG) so it wasn't a stupid question by any means.

If you wish to can go to the ASX website, Register (it's free) and establish a watchlist of those share in which you have an interest). I don't know if it accepts the four charachter [sic] codes which some investments have as I don't hold any of those - apart from WHFPB which I hold and forgot to mention - so now I think it probably does. See, even I can learn and do I have a lot to learn.

PS: sometimes my spelling is crap but I don't care anymore

 

Ta much appreciated.

I plan to make a one off contribution up to the caps just before 60.

By then I might only be able to put in 600k in total. Assuming a 5% return..that would give be about 75k in income per year no tax (assuming goobermint does not diddle)

 

Thanks for the clarification...between you and @Nodrog I got it.

 

Or you can just do an annual non-concession Super contribution of $100K pa plus $25K concess contribution each.. So a couple can do $125K each pa or $250K pa combined. I was using the three year bring forward rule in my earlier example.

 

Yes...I see ...but the non-concessional is after tax correct?

The other thing is to continue to to a transition to retirement in parallel.(post 60 of course)..if that option is available...

 

Yes after tax for NCC. But then once in Super any inome is only taxed at 15% and discount CGT of 10%. Then of course tax free from 60. But you’ve only got a limited time to get it into Super.

Transition to Retirement not attractive for many after recent changes effective fro 1/7/17.

 

Hmmm...I like that....thinking this post 60 income:

1. Super assets $1.2m - 50-60k pa
2. ETC/LIC assets $1.5m - 60-75k pa
3. Rents (net) - $80-120k

So income of $190-255k income is possible...more if I move to top 2 asset types.

The beauty is also...the tax effectiveness via super (0 after sixty), depreciation (assuming 60k relief) and some relief via franking credits. So about 120k would be quarantined from taxes...but would need to pay about 30k in taxes.

 

Ah @sash, I know tax and the horror paying it is a popular sport but let's get down to the nitty gritty. $30k/$190k is 15.8%. My view of that is so effing what?

 

Exactly......I would be happy paying even 50k.....worst case.

 

You could do it as a 3 fund portfolio of STW/VGS/VAF.

But what the hell.

Using ETFs only you could construct something like below that I’d be personally comfortable holding through any weather. Just keep some cash on the side as buffer. The portfolio has some lowish correlations (no guarantees) so key with below is that you should rebalance every couple of years with additional cash if you can which “should” provide a premia or at least dampen volatility.

30% ASX200 STW
10% A-REIT VAP
10% Small Cap Dividend MVS
15% US Broad market VTS
15% World ex US VEU
10% Vanguard Global Infrastructure ETF (pending)
10% Australian Bond Index VAF

60/40 AUD/Unhedged. 3 ETF providers. Higher international weight than some may expect is a nod to your large existing Australian residential prop holdings. This would only cost around 20-22 basis points (approx) pa. A bit of record keeping. Tried to keep as simple as possible while seeking different exposures.

 

Ta..keep it coming!

Luv this stuff..I am getting a lot out of it and I am sure others are getting some off the masters of ETF/LIC also

 

@Nodrog is rightly laboring this point on super

This is super (pardon the pun) important. Seriously people should look at post tax contributions where they can as part of their total asset mix (think of as separate buckets) and become as clued up on the opportunities as they would other investments.

60 will come around soon enough.

 

Yep get that....

 

@Il Falco -is it possible for you to throw some light on the above?!

My understanding is people do salary sacrifice into super to reduce the taxation income but post tax contribution ?