We want retire...but we don't know how....

We are about to turn 60. In 2010, despairing of super, we began to invest in property using our home as equity, and we have ridden the sydney property boom since. Lucky us. We are just 2 PAYG.
But we need advice on how now to retire. Not sure how to live off equity.
PPR owned $1,400,000
Property Portfolio worth $2,800,000
Owe $2,000,000
Net rental is about $20,000 per year.
We have $600,000 in super.
We have borrowed against the increased equity, and have $200,000 in offset accounts.

Can anyone tell us how to retire. And we love to travel

 

Start a transition to retirement and recontribute via salary sacrifice to your super.

Does your property portfolio of $2.8 exclude your ppor?

 

Sell/downgrade your PPOR (maybe to one of the IPs) after that is spent then use your super - then start selling IPs.

That's are plan but with super first.

 

How much annual income do you need?

 

Mm. Interesting.
We probably need -about $70000 per year. At first...travel.
We already sal sacrifice to the limit....I'm worried about changes to the ttr program. I'm happy to continue working less hours. And between us we have 1 year of Long Service Leave.
$2,800,000 is without PPR.
And don't want to sell PPR yet.
Wondering if he can retire now or do we need a few more years?

 

If your retire your pension will be an account based pension.

The TTR changes will not apply.

On your numbers you will likely eat into your capital but you should be ok.

Go to an accountant with a limited AFSL or a financial planner and they can model your investments in different scenario's.

You might want to look into using your super a bit more. But I think you can retire on 1.4m invested.

Well done. Take a moment to celebrate your success to date. The average super balance in retirement is a lot lower than yours.

 

Yes...excludes poor.

 

Oops. Ppor

 

Thanks...I'm assuming the 1.4 is the upper plus the equity?

 

70000

 

Holy crap, that's a lot of loan to have at 60, at these low interest rates . What happens when Sydney cools in the next few years, and interest rates rise. You could be biting into your super to fund the negative gearing.

I would sell the 2 investments ($800k equity), Buy a cheaper $500K property (good yield, so your net rental after expense should be around the same $20000). Travel with the $300,000 left and super.

 

So you need $70,000 pa but are getting $20k now?

$50k shortfall.



You love to travel – considered renting out the main residence for say 12 months and travelling?

At 4% yield you might get $56,000 pa in rent. Perhaps lose 20% of it in fees an expenses = $44k left over with your other $2k = $6k short fall.



You could live on the rents and borrow to pay for things like rates etc so you would be increasing tax deductions.

Any shortfall you could dip into cash reserves or better yet borrow to pay for more expenses associated with the properties and have more rent to live on.

In 12 months or so you rents may jump. If you are getting 4% yield on $2.8mil in property the rents would be $112,000. If rents increase say 3% next year that would be another $3300 in rents received. If you can keep your expenses low this rent will gradually exceed your spending and there will be no need to sell property.



So you should be able to live on what you have now, before even considering super. You could possibly start drawing on that too if need be.



Watch out for borrowing to park in an offset account. Hope you have split the loan for this and also not put any deposits into this offset?

 

Still have millennium children living at home. So no renting out for us.
Our gross rent from ip is about $160,000. They have been rising dramatically over last year. Up until last year we were neutral or negative. We have about a 7% Yield. We bought 3 units on one title, did them up, and they are very successful. Wollongong is growing nicely. Plus 4 other units.
We refinanced last year and leveraged to 80% . These are in separate accounts against each property. To be truthful, I didnt know what to do with the monies.
We have a separate offset for our everyday.

Would anyone suggest paying off io loans, or adding extra to super as non salary sacrifice....or? Is ttr the best way?

 

I think that we have only just started getting rental positively geared...we did up 3 units on one title. And they are returning a great yield.we also have 4 other units.
We have the $200,000 in offsets as a buffer....is this not enough?

 

Paying off IO loans could delay retirement as you have less cash available to spend!

 

Sell IP say get $400K (maybe more) +$200K +$600K, total $1.2m.

30years

$1,200,000 to $0

3.2% term deposit (hey not what I’d do)

$62,816.45 Payment a year

Not a lot to worry about

 

Sounds like what a financial planner would suggest!

But this goes to show worst case scenario you could still 'retire' by doing this.

 

Our risk is mitigated....we have 7 units. But your point of much higher interest rates is well taken. How can we anticipate this to begin selling?

 

Damn. Would prefer to worry a bit more. Not 60 yet!