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

Thanks Wylie,
It's a matter of treading slowly I think....

 

There wont be $300K left after CGT and sale expenses.

 

Many people think age 60 is the END...it is not IMHO...if you intend (haha!) to live to your 90s, you still have another good 20 years investing cycle to benefit from...

Why sell then?

Your problem is cash poor, equity rich...i think TerryW had a very good thread on how to make use of equity to retire??

You intend to retire into a PPOR worth 1.4million ..in other words your opportunity cost is 1.4 multiply by average mortgage rate of 4%=56K ie you are "spending" 56K in implied rent to retire in your PPOR....think about that..downsizing perhaps?

You mentioned your kids, do you intend to pass assets /property to them? If so is there any possibility of coming into a private arrangement (but draw it up with lawyer) for them to drip money to you in return for an eventual share?

Just throwing my 2cents worth...Good Luck!!

 

Hi Virgo...we have enjoyed the (late) journey into property investing. We don't want to sell. We do want to keep investing. I can't believe that I found this forum so late.
I saw TerryW thread. Very interesting. I think that using equity that way plus super plus rent....will do us nicely.

Our kids pay us? Ha.

But we have been looking at 'intentional retirement' sites, which has meant a lot of spending over last few years..a lot of holidays....and looking forward to continuing our journey.... and we have inheritances coming..from both sides.....hopefully not for a long time. Though.

I was overwhelmed by making a decision. I realise now that we can make decisions as we go along without putting us into financial Ruin.
And take our time. So we can sell and downgrade...but not yet. We can take some super out, but not yet.
Thank you everyone. Lots to consider. But no need to jump.
Ros.

 

Well done Ros...yes...slowly, slowly we go...thing is you have a lot of levers to pull...once you have equity, no worries ...you can always convert that to cash if push comes to shove...

For me, i intend to grab cash flows from a few streams...super, rents, dividends, share sales mainly...i will adjust as i go.. our needs do vary as the years go...some years UP...and as we grow older and travel less..i see cash flow will drop...your 70K may drop ..who knows?

I am not averse to eating into my PPOR IF the kids do not want to hold on to it...i will see when the time comes...

BTW i am also researching retirement destinations...where have you been?

 

Why not? I help my parents out financially in their retirement and I'm not even sponging off them by living with them for free. I do it out of gratitude for everthing they've done for me. I gather you have made similar sacrifices for your kids, so IMO it is not an unreasonable ask to make of them.

 

Having read terry_w article on capitalising interest, could we place the interest payments against the offsets for each of the loans?
That way, we would gain another $8000 per month ...tax deductible...while we work our last year...tax benefits for the year. The reason would be for cash flow.
.?

 

Perhaps. If you stopped working you would need to keep more rents to life on and this may justify borrowing to pay the interest.

But it is a dangerous area so seek tax advice first.

 

Oh....we love to travel. Croatia a few years ago. Wonderful and welcoming place. We love old architecture...lots of roman. We spent 8 weeks slowly touring Italy, in 2015, and sought my husbands relatives...I recommend the south of Italy...fantastic locations....and we spent a week in a villa in
And last year we toured Egypt for 5 weeks. Jordan was fantastic as well. Egypt was the top of my bucket list. And going now means no tourists.....it was FAntastic...again...ancient art buff. Still revelling in the photos. But the poverty was very sad. They need us to tour to help them.
Taking my elderly parents to far north qld for 4 weeks.....they like holidays...but are finding it hard. So we are making sure we take the opportunity with them now.

 

Maybe I was a little facetious. My kids are still in their 20s. Saving to start families...of course if we needed it...but I think we can do it ourselves. Perhaps help them a bit more.
You do sound like a great person...

 

Hi Terry,
Thanks for your input. Needed to get my head around the alternatives.

These are actual figures projected for 2017.
Rental = $144000
Interest = $84,000
Expenses = $40,000.

So what you are saying is that the rental and interest payments go into our home account to live on...about $60k.

Expenses are paid for from the offset account...increasing the debt. And another credit card with points!

Won't this also increase the interest....and do we ever get lower debt?

Is this a bad tax plan...?
Ros.

 

What you could do is borrow to pay part of the interest and/or expenses.

For example you want an income of $60k. The rent minus the interest gives $60k but you also have $40k worth of expenses so you could instead borrow to pay for these.

The interest on this could be deductible. $40k at 5% = $2000 pa in interest costs in year 1.

Would you pay an extra $2000 in interest to retire early?

If so worth considering.

Don't forget if rents rise 5% next year that is a $7,000 per year increase.
So you may only need to borrow to pay for the expenses for a short period.
(also consider rates may rise)

This may or may not be a good idea, but something worth considering and getting advice on perhaps.

 

You sound like you love Europe. My suggestion, given your kids have grown up, is to base yourself in Italy or Croatia or Portugal etc (and ensure your living expenses are < Oz).

Travelling within Europe would be a lot cheaper and you would have a 'permanent holiday b/c numerous sporadic holidays ex-ing out of Oz are much costlier.

I would rent out your house and have the kids move out with their friends/each other.

 

A long time later. Lots of changes.
But......can you tell me why you said to take out monies from super to buy LICs.? Wouldn’t you leave the super and change to pension?
I guess my q is what is the advantage of holding the assets outside of super?
Ros

 

$1.5 million in the usual suspect, stable, long term LICs would NET you about 4%....so $60K, not $96K. Or am I missing something?

 

Is it the grossing up that missing?

 

Within super and out of super will give you different end results in income/taxes. Inside super will help you protect your cash so people can't take it. Which ever way you do this you must get advice on this to maximise the returns.

It's been some time since pinkboy wrote that, and some changes to be aware of regarding lic's is if labour get in they will change the franking credits paid on dividends. That 6.4% grossed up will be much lower, which will mean the lic's will most likely also take a hit to its buy in prices.

 

There's an easy solution to this: Kick them out.

You'd be better off renting the house out and supporting them with say half the rent.
I know you're probably not likely to do this, but hey, it's an option.

Given that you said that you'd be happy to work part time, why don't you do the following: You said that the two of you had 1 year of LSL between you. I'll just assume that it's 6 months each.
So you both take LSL at half pay (should easily amount to $50k), which means you now have a year off to travel, do whatever.
Then when you come back, you get enough days between the two of you to get you to that $50k mark. If you're on a reasonable salary, this should be three days or less per week between the two of you. This might be a workable solution.
I'd also advocate for this as I saw with my dad retiring at 55, he lost some of the meaning in his life (not saying his life is meaningless, but he took a lot of pride in his work) and would have been far better off going to two or three days a week.

 

So. Yes. Long time ago. Lots happened.
2 kids moved out. Yah.
1 kid moved back in. Poor thing.
And my nephew moved in.
They do pay rent.

Husband went part time in jan 2018, then retired in July. We use his payout to continue to end of the year.
I went to 3 days a week, but have started working from home. I invented an app that is taking off, and should give us $20000 per year minimum.
We bought a motorhome, and have been travelling a bit and love it. So upgraded recently. We will start a 6 month trip around Aus in January. I’ll work from our motorhome for another 18 months at least.
Also using LSL for our main income.

We bought a set of units in Albury in 2017. We plan to strata it in 2020. Positively geared. Overall portfolio is positive before tax by about $20000. We have put lot more into super. Looking much Healthier and we will live off it when we need to. Not yet.
But...The change to the io to Pi really changed the way forward. Ours is in 2021.
We have decided to retire anyway. ( Stuff the *******s!). Our plan was to sell down gradually. But..

So. We sold one property this month. Ps Bankstown is crashing. Big and suddenly. Have another small one on market in north. Not much equity out of either since we had already taken it. But overall really good.

My question was based on me wondering whether to use the leftover (only about $100,000) to either put into super or into efts etc. (I’m still putting $25000 into super.we will work it out for hubby later).

Thanks...great minds.
Ros