Is $60kPA really enough to retire comfortably?

The key with share investing is you buy a diversified portfolio of shares like broad based index fund or Listed Investment Company. You can google them if this is the first time you are hearing these terms.

Rent from the IPs can be stable but the fact of the matter with IP is they get old with time requiring maintenance which means it costs money/effort/time on your part to bring it up to livable standards. They have ongoing costs (property manager fees, insurance, rates, land taxes) which comes out of your rent money. They have occasional vacancies which means no rent. So it all depends on what your definition of stable income is.

There are some of us who have experienced the life of landlord and index/lic investor and find that life of index/lic investor is so much simpler and passive. The dividends from these assets just keep coming year after year increasing at or above the rate of inflation without any effort on part of shareholder. The best part is dividends paid is 100% income to you which you can spend. There is no need to keep aside money to pay any ongoing expense mentioned above from it.

It comes down to knowledge about asset class and what you are comfortable with. Shares can be scary to lot of people because of all the stories you hear in media about how much money average Joe lost in share market crash. The media never reports All Ordinaries which is broad based index for Australian share market has returned close to 11% per annum over past 100 years of which dividends were 4% and capital growth 7%.

Below is historical chart of all ordinaries from 1875 which makes me sleep very comfortably at night.



Cheers,
Oracle.

 

And, with no other taxable income, each year we submit a form to the ato and have the franking credits paid to us.

Bonus!
Marg

 

Unfortunately I've always been a low income earner so 60k would easily be enough to retire on. 60k for a couple is still double the rate of the pension that an aged couple receive.
Age Pension: September 2017 rates apply (until March 2018)

 

But not everyone buys and holds property there are plenty that trade ie develop property and there are some other cool strategies that you cant replicate with shares.

I hate charts because they are too broad, what happened to the GFC crash in Oz?? I know people who got burnt during this period. Those margin calls are nasty.

I am also not minimising the fact that property prices can also fall back significantly. If you are chasing cash flow, personally you can do better than 6% yields with property but it requires the investor to be far more active not passive.

Results as an investor will always come back to timing the market IMHO.

If you purchase at peak shares or property you will be hammered either way and get stuck. Yields are not a given regardless of asset class, they can go up and they can go down

 

Ofcourse, but I wouldn't class them as passive investors. There are investors who have a full time job and are not interested in headaches and risk of developing. I think you don't fully understand shares else you wouldn't be making comments like cool strategies with property that cannot be replicated with shares. I can assure you there are many more share traders than there are property traders. It all comes down to investors edge. If developing was so great and risk free how come you hear stories about so many developers going bust in a recession? As Warren Buffett would say "Only when the tide goes out do you discover who's been swimming naked.". Whenever, Australia has a recession/property bust I can assure you there will be a new story everyday about property developer going bust.

Again, shows you are very short term focused. There are some investors who don't care about 2,3 or even 5 year returns. The best returns are made by letting compounding do its magic and letting maximum dollars compound for you without having to constantly share your profits with the ATO. Please don't give me isolated examples of what happens to buy/hold investor in Perth or some other state. I can also give you plenty of other examples to prove my point. As mentioned in my previous post the key to to diversify. You could do that with property as well. An investor who invested in capital cities like Perth, Sydney, Melbourne and Brisbane for example. From 2000 till now each of those cities experienced booms at different point in time and your returns would be very satisfactory over past 17 years even though you knew nothing about timing.

Yes, but why do you assume/think every investor always purchases at the peak? There are some investors who keep buying (aka dollar cost average) and are happy to ride the booms and busts knowing in the long term their returns will be better than 90% of professionals who try to time the market.

Cheers,
Oracle.

 

Isn’t this thread about being RETIRED on a certain income?

My idea of retirement is about only doing those things one enjoys doing and to no longer be having to do all that work! If you love having to deal with all the baggage that comes with owning property especially when OLDER then fair enough.

Not for this fella though. As a retiree I want my income coming in without having to do a single thing but spend it. That’s the true meaning of PASSIVE income. And the beauty of LICs which @oracle mentioned is that being a company they have the ability to smooth dividends. GFC, no worries, the fall in LIC income wasn’t major and recovered relatively quickly. A cash buffer sensibly maintained would have likely covered any temporary dividend shortfall if need be.

Not advice of course.

 

I don't doubt any of this except the nagging worry about the possibility of the LIC/s going bust and/or my dividend stream being decimated for x years bc management decided it should for xyz reasons. Is that an impossibility?

 

Any investment comes with a certain degree of "Risk". For people approaching retirement or those fortunate enough to be retired I believe time becomes an important factor in managing their portfolios whether it be property or share based. For this reason many see LIC's as a relatively hands off way of achieving this goal. I don't see the sense in trying to acquire passive income if you are continually having to hover over it; that's really not retiring.

 

I don't personally consider having to take a call from an agent re: some repairs 'work'.

Anyway, am still personally uncomfortable about having say, $2-3 mill of one's hard earned lying in someone else's hands with no guarantee of its preservation, let alone gains.

That's why I haven't pulled the trigger on the final phase of my investment journey. Maybe I'm a control freak?

Mind you not puling the trigger and holding on also comes with cons.

 

Is it just me or other investors don't want to worry about their IP being burnt down or ever being sued by their tenant or tenant trashing their property and doing a runner. I know you can get landlord insurance but who wants to deal with insurers when I could be enjoying life. May be I don't want to be a control freak and just want managers of my companies handle the day to day hassles. Just show me the money and make sure it gets deposited into my account every 3 or 6 months. Make sure the trend of income received is growing faster than inflation. Can't ask for more.

Cheers,
Oracle.

 

Horses for courses I guess. You are right to be concerned about where your " hard earned" is invested, everyone should be. It all boils down to Risk.
Unlike yourself I personally don't want property managers ringing me re: repairs, rental arrears, damage concerns in my retirement.

 

I guess I'm one of those investors who doesn't diversify into stocks much. I'm heavily in real estate but I focus on this asset class and diversify within. Since I only invest in real estate, I intensely concentrate on becoming the best I can be within this area. I probably wouldn't have a clue about 95% of the real estate markets/strategies mentioned on this forum but i don't need to. I focus on becoming an 'expert' in only certain markets/strategies that will allow me to net a greater return than perhaps those who have their fingers in too many pies. This approach works for me.

 

And fair enough. SANF is the most important thing. But also with time and conditioning you can adapt to being comfortable with Shares. But some will never be comfortable doing this and that’s fine of course.

The major LICs have been going 70, 80 plus years so pretty well tested I would say. For them to go bust productive enterprise in Australia would pretty much need to be wiped out. Not sure who’ll be able to afford to rent the IPs then! A bunker, an AK-47, lots of water and canned food would be the recommended investment in such a scenario.

 

I understand the power of leverage and diversification.

The chart provided a rosey picture of shares, I am simply pointing out not so rosey for the imvestors who purchased when share market crashed during GFC. BTW property also fell back, except Melb it was the only booming market in Australia. No chart will show you this

I live off rents, i just dont get caught up with the mechanics of this .....that is why I employ a PM

Developing has risks, but investing regardless is not without risk

I develop when markets are rising reduces risk. Another way is build lower end product where rent covers debt and access equity and hold

MTR

 

Consider this Leo, just for a moment. If you were to intensely focus your attention to other asset classes (LIC's, ETF's) I am sure you would make a success of that also. You quite regularly speak of mindset, which stretches across all facets of life.
I do like your point about fingers in too many pies. Sometimes people over diversify and pay way too much in fees.

Cheers.

 

Considering I know my limitations with risk and how my own investment psychology is wired, I don't think stocks would be a good fit for my overall investing profile. I do think its very important to know your own strengths and weaknesses and for me, the stock market in the main, would be outside of my best abilities.

 

I rarely ever talk to any PMs, I am hands off
I guess that is passive investing

 

I purchased shares like crazy when the share market crashed and we retired 4 - 5 years earlier than planned because of it.

But seriously @MTR and others here I hope no one takes any offence in this old property vs Shares debate. I Learnt years ago it’s not worth taking these debates too seriously. It’s just a bit of fun with very few ever changing their view. As long as one invests sensibly that all that matters.

 

Ditto

 

I think you are selling yourself short, but understand your sentiment.