Mini Retirements

Don't forget it is an Australian winter. It feels colder than it really is. I certainly get tired of the cold towards the end of a long winter - there is only so much -30degs I can live with - but I also get tired of +40days (like today).

 

I lived in Vietnam for 3 years and for lifestyle it was amazing. My quality of life was much higher than what I had in Melbourne.

 

Japan is actually very cheap and first world. Thailand is 3rd world politically, but facilities are often better than Australia - look at the hospitals and trains.

KDP what is Vietnam like? I have never been there but heard about more westerners living there lately.

 

Life as an expat in Saigon/HCMC is great. The city is developing very fast, enough nightlife, restaurants and comfort for even the most discerning taste and yet still with the culture and excitement of living in a developing asian city.

In terms of cost, English teachers there on $1000-$1500 a month still live very well.

 

How about language? Vietnamese sounds difficult to learn for me. Can you get by in English?

 

Yep, very easily. Most expats actually don't really learn that much more than just the basic Vietnamese.

Healthcare I haven't mentioned yet and my experience of it was great. Plenty of international operators in country, costs I think was also reasonable (ie. $50 for a physio appointment) but most was covered by health insurance anyway. For more serious issues, Singapore and Bangkok aren't that far away anyway.

 

With a young family, living abroad in a less expensive Asian locale - Bali being a preference - isn't really possible at this stage, plus if we were to do it, then we'd be up for $15-20K per kid in international school fees. We'd simply trade one expensive environment for another.

However, what I intend to do in the next couple of years is take leave without pay for extended holidays (if the employer allows). That way, I can still have the safety net of FT employment, and prove to the banks that I'm full time PAYG to borrow for IPs or get limit increases, without the financial stigma of being a part timer.

One more thing to add is I got a shock this year and had to pay income tax due to a gradual reduction in interest rate payments over the last 24 months. This is after years of not paying income tax thanks to a large but neg cashflow, CG based portfolio. Personally, I'm opting out of a pure LOR retirement scenario, and don't see the point of slogging away and striving for a huge rent surplus to fund our lifestyle, only to then have 30%+ of that surplus decimated by income tax (on top of the land tax bills we pay).

Therefore the plan is to earn no more than $50K pa in active exertion income, with the property portfolio breaking even in the background. Depreciation claims will then take me down to taxable income of $20K or so and voila, no more income tax. The balance of our living expenses will be funded via equity in our properties.

 

International schools can actually be affordable if you pick ones that are subsidised. For example, the French school I think is often subsidised all around the world. Sure your kids will probably have to pick up some French in the process, but I would view it as a positive.

 

No big deal, well, a bit of a big deal having to learn French (and quickly), but am guessing a French school won't align to the Australian curriculum. I mean if we were brave enough to do it, we'd still probably opt to come back for at least Yr 11 and 12. But food for thought all the same.

 

Kids pick languages up really quickly. I think it'll be great for them for a few years. Even if longer term and through yr 12 and 12 I don't think it matters that much, they would probably have IB or something with more of an international focus.

 

@ Lacrim Hey, I'm trying to do something similar to this next year but am interested in your comments about paying tax on rental income vs paid employment. Our portfolio is returning around $40k net but I'm just using depreciation for the first time, and also now adding a newly purchased negative geared ip so that will reduce a bit. Even if I could live off that I think I'd get bored not working at all so was planning to work half of the year from next year which would give us around $30k savings per year and then the extra from rental income. We don't pay land tax so that's not a concern but are you meaning, in your case, that you find it quicker and easier rather than waiting for enough equity to LOR to just work and plan to earn and spend no more than $50k pa and just wait for neutrally geared property to increase in value whilst you use part time paid income for living expenses? Just wondering as I'm pushing myself at the moment to pay down one more property to increase our passive income to around $50k but not sure if it'd be better to pull the plug now and enjoy life, being happy to live off what we have currently.

 

Having spend the first quarter of my life studying and just now entering the workforce in a full time capacity I really enjoy the idea of a mini retirement! It is not something I have really contemplated.. But that may be because I clearly had no idea how cheap S.E. Asia was!

 

EJ, put it this way, if you were $40K net on your property portfolio, plus the $30K you intend to earn, then your taxable income would be $70K, and you'll be paying, I don't know, 20% of the $70K in tax?? However, your depreciation claims will aid in reducing that taxable income, because it's a (paper) loss. Which means you'll pay less tax than you otherwise would without depreciation.

In relation to me/us, what I meant was we intend to use a combo of meagre, active income from work or business plus an equity drawdown done once before I 'retire' from my current job, to sustain us till the portfolio allows for full LOR. For example:

Living expenses pa = $70K
Travel, etc = $20K
Rent/mortgage = $40K
Total living expenses = $130K

..paid for with $50K in income via job/business, and $80K in equity

I am aware of the perils of going back to the bank for accessing equity, particularly if I ditch my higher paying job, therefore, intend to make a large equity drawdown before I quit.

 

Where do all u guys find the money for these mini-retirements? Concept sounds great, but i'm guessing u need quite a bit of moolah to do this. Maybe i'm doing something wrong, but all my spare cash has gone into deposits for IP's, to try to build the asset base. Don't think I can afford a mini-retirement for a long time.

 

I was just talking to a client who has paid off his main residence and earning about $200 pw positive cash flow from his IPs. Not enough to retire on, but we talked about mini retirements and I said he had 2 options:

1. Save up - which is easy when no longer paying a non deductible loan. Store the cash in the offset and then when the time is right just go away. He may be going back wards a little bit, but he has a few properties growing still.

2. Rent out the main residence - say $1000 per week. That would be enough to live on in some countries. Even in certain areas of Australia.

 

Does anyone actually know any families with school aged children

Personally I'm not there yet, unlike some of the other posters. Still a bit of work to do to get there. Having said that, I started investing in 1997, so its def not overnight!

 

This is about where we are at. The plan is to purchase our PPOR and put our cash into an offset. Then rent it out and travel for a bit. This should give us about $500-1000/week. Which is inline with our current living costs.
Not saying it will be easy. Although this is our current burn rate, we are quite accustomed to having a more generous cashflow.

 

Well there's always tax. We pay a small fortune to accountants and have all the paperlosses sorted, any tax is just what we have to pay and I'm not stressing about it. We're planning on doing semi retirement cheaper than you I think, but we don't have kids which obviously makes a difference. Even so, we're pretty frugal which has allowed more savings maybe and lower expectations re future mortgage/rent costs/travel and living expenses. We're probably much older than you too which would also make a difference maybe re what we think we'll need in the future. What age are you planning to give up work? Good for you, great that you have the numbers worked out and a plan.

 

We've been investing for around 15yrs on and off so it takes time, also depends on your strategy, luck and other factors. A big thing for us was moving around to find the highest paid positions we could get, doing that for a few years and saving every cent. We bought some cheap, high yield properties and paid these off to get additional cashflow happening. Not everyone can move jobs to increase their salary, but for us it's made a massive difference to building up equity reasonably quickly without the need for a property boom.

 

For this mini retirement I am doing option 1. Will be digging into offset savings and as a result will be delaying full early retirement by a bit, but I will only be young once

For my next mini retirement I hope to have a fully paid off main residence and be renting it out, allowing me to travel indefinitely.