Need Recommendations to My Retirement Plan at 45 Years

yourflights on 11/12/2023 - 15:28
Last edited 14/12/2023 - 16:18

Hello Guys, me again. This is a follow up post after my last post got so many comments and suggestions. Please refer to my post here

https://www.ozbargain.com.au/node/792858

and then consider providing me recommendations for below plan. After reading all comments and doing lot of research, I have done below planning. Please let me know your thoughts regarding this.

Step 1: Next 5 Years (Accumulating Savings)
• Continue working for the next 5 years.
• After 5 years, I will have:
• Home Value: $1.5 million (assuming no change in value)
• Superannuation: $250,000
• Accumulate savings from salary: $300,000

Step 2: Retirement (Starting from Year 6)
• Sell Primary Residence: Receive approximately $1.5 million. I (me and my wife) will use 100K from our savings to make this 1.6 million. Remaining 200K will be kept as emergency fund forever.

Purchase Properties:
• $600,000 Townhouse/Unit in Sydney and live in that with my son.
• 2 Investment Properties ($500,000 each) in other states

Rental Income and Expenses:
• Total Rental Income: $50,000 from both IPs
• Annual Expenses: $2,000 (tax) + $12,000 (SIP in India) + $36,000 (living expenses) = $50,000
• Flexibility to work part-time if additional income is needed.

Investment Strategy:
• Invest additional $12,000 annually in SIP in India. This will come from my son who will be paying me $1,000/month for accommodation, invested in SIPs in his name.

So basically, We will be doing 24K SIP in India for next 5 years (6th to 10th year from today) and living off 36K per year (+ some additional income from freelancing if needed). We can live in Bali, India or Australia from this regular income.

Step 3: After 5 Years (Year 11)
• Sell Sydney Property (PPOR): Estimated value of $700,000-$750,000.
• Give $144,000 (from SIPs) + $200,000 from our property sale to son for his own home. I think 344k will be sufficient to pay for his new home deposit at that time.
• Total assets available for me at that time : $500,000 + $200,000 emergency fund + 2 IPs.

Step 4: Post-Retirement (Starting from Year 12)
• Move to the first Investment Property (in Brisbane) and make it the new PPOR. I always wanted to live in Brisbane so this will help.
• Have $500,000 invested, generating a 7% return.
• Withdraw 5% annually, adjusting for 4% inflation (withdrawing 22K in first year, 23.4k next year and so on.. 67K at 29 years).)
• Supplement income with $25,000 rental income from the second Investment Property.

Step 6: Long-Term Plan (Up to Age 74)
• Monitor and adjust spending based on FIRE (Financial Independence, Retire Early) plan.
• By the age of 74, FIRE corpus may be exhausted, but We'll have the Brisbane home, second IP, $200,000 emergency fund, and potential growth in superannuation.

This will keep us going forever and if and when we die, all will go to my son so he will he happy too.. We haven’t considered aged pension at all in our calculation as we are not sure if this will be available at that time..

We have considered all recommendations provided by OZB community in this post and used them to below advantages to ourselves:

• Living with Son during Uni:
• Assisting Son with Home Purchase:
• Location Flexibility (Australia, Bali, India):
• Lifestyle choices and exposure to diverse cultures.
• Emergency Fund available
• Option to Tap into Super if needed
• Inheritance Planning for Son
• Regular Income from FIRE and Rental Income:
• Financial independence and stability throughout retirement.
• Long-Term Sustainability:
• Adaptable plan for sustaining desired lifestyle over the years.

PLEASE PROVIDE YOUR FEEDBACK TO ABOVE PLAN AS I REALLY APPRECIATE YOUR INPUT. Please note that I am not providing any advice or showcasing any financial advice or skills here. Purpose of posting this it to get feedback from you guys for my own benefit. Please do not try to imitate or copy my plan to your situation as your situation may be different and you should do your own research and get financial advise from a qualified advisor. Thanks

Financial

Comments

    • jaqoozi on 12/12/2023 - 20:28
      +3

      I have 2 IPs bought more than 10 years ago. If I had bought them at their current valuations my income after expenses (but before tax) would be 1.2% pa…

  • SpicyStew on 12/12/2023 - 21:18

    what happens when you find out you have 6months left due to stage 4 cancer?

    • Dreamcast on 12/12/2023 - 21:41

      Oooft, take it easy there mate.

      The post gave me stage 4 anxiety though.

      • SpicyStew on 13/12/2023 - 02:51

        It's all part of risk management, nothing personal.

        • drprox on 13/12/2023 - 08:08

          tragic but true, with modern medicine and life expectancies pushing out significantly cancer will get us all

    • yourflights on 13/12/2023 - 10:10
      +1

      Isnt that make everything easy and smooth.

      If thats the case, I will use my TPD insurance for treatment (so I can die pain free) and remaining money/assets will be for my son. It will make his job easier and may be he will be putting another forum post on OZB asking the community 'what should I do with this 1.5 million assets at age 21"?

      • SpicyStew on 13/12/2023 - 14:06

        pain free stage 4 cancer? good luck

        • yourflights on 13/12/2023 - 16:02

          I said, I will spend all remaining money to minimise pain (sorry no pain free) as I dont have to think for too long at that stage of the life.

  • serpserpserp on 12/12/2023 - 23:16
    +1

    I haven't read all the comments which might have picked up all the points I'm about to pick out here:

    Your expenses look light: doesn't seem to account for stamp duty/legals for buying properties, 5% should be the budget here, so 80k down the gurgler. If you are buying unit/apartments your expenses for body corporate/rates seems low, not sure where you have added them.
    Your personal expenses seem light for you are your wife per year, seems to be little inflation considered.
    Also assuming you think you'll get $500 a week from properties costing 500k (or less). Don't see a lot of IPs getting 5% p.a clear. You haven't considered all the insurance and letting costs here, nor paying for water and repairs etc.

    I have other questions, but let's just start with the easy expenses.

    • yourflights on 13/12/2023 - 10:15

      @serpserpserp, I agree with most here that expecting clear 5% rental yield is bit too much. I am reconsidering that to be 4% and bump up with my freelancing/part time work. Or may be having 2 properties and other bucket to be invested in bonds/etf etc.. I am aware that if I retire in Australia, I will be living modest retirement however If I move overseas, it will be better. Please keep sending more questions mate.

      • serpserpserp on 13/12/2023 - 21:15

        You still didn't answer the other expenses I mentioned, have you factored those in?

  • drprox on 13/12/2023 - 08:05

    good luck, to my eye (unless unstated) there seem to be way too many aggressive underlying assumptions and missed significant costs including stamp duty and ongoing land tax and outgoings on the IPs. Most people would want a lot more fat in the equation.

    summary recommendation - work for longer

    • yourflights on 13/12/2023 - 09:53

      Thanks. If I simplify this, how about this..

      600K townhouse in Sydney and remaining amount available as FIRE corpus is 1.2 million and 250K super. When I put this amount in FIRE calculator, it can last for 30 years at 4% withdrawal, 4% inflation top up withdrawal each year and only 7% return (starting with 48K in first year to 150K withdrawl in 30th year). At the end of 30 year, I will still have sydney home (which may have gone to 1 million plus in value) and a million in super (250K starting super will become million in 30 years easy) and access to aged pension (if I am still alive at 80 years). Is this not achievable?

      • ippy on 13/12/2023 - 18:59

        I got 45 years, not 30 with 1.2m @ 7% return, 48k annual draw down with 4% inflation. https://www.noelwhittaker.com.au/resources/calculators/retir…

        If you only need 1.2m to last 30 years then 60k drawdown is possible. Living on 48k for a couple is possible but might be tight if you have unexpected large/ongoing expenses that pop up, maybe later in life. For a lot of people I think this is unfathomable, especially if you are considering living in Aus for half the year. But if you are prepared and have low outgoings then it might be ok. I would probably pad out more for travel costs.

        That said, on paper the rest of your figures work however as OC stated, you need more funds for any IPs you plan to have. Insurance is not a silver bullet. It takes just one bad tenant to ruin it all. This is where ETFs become more attractive, there is no management or fees, except brokerage which is basically nothing, relatively. This is not financial advice. lol. I also think rental yield of 4-5% is too optimistic.

        Finally, I am looking into the tax residency laws myself as the ATO website kind of sucks, I am considering hiring a lawyer/accountant with that expertise for advice as I too am considering retiring elsewhere (in about 10 years time prob so still planning). I have watched a few of the vids on youtube from Atlas Wealth Management, who specialise in this. The 183 day rule is only one of three tests they use and it is only for "individuals arriving to Australia". I think all you need to do is satisfy the domicile test. IANAL. Source: https://www.ato.gov.au/individuals-and-families/coming-to-au… At the moment I am leaning towards maintaining tax residency so not to trigger a GCT event but I do wonder if its wise…

  • drfuzzy on 13/12/2023 - 08:36
    +1

    You don't have nearly enough money to retire comfortably in Australia at that age, especially with a kid.
    Even living in a low cost country such as India you will need to live below Western standard of living.
    I'm suprised you are even thinking about it at this level of savings.

    • yourflights on 13/12/2023 - 09:47

      Wow. You think so? $ 1.5 million itself is 8 crores INR. A fixed deposit of this money will give 5.6 million INR each year. I can tell you how much levish life you can live in that money. I have friends who live really good life with only 2 million even (really rich life) so this 5.6 million INR per year is even inflation proof for next 30 years. That too without touching the original amount of 8 crores Rs.

      in my home city, 3 bedroom nice double storey home can be rented for $500 AUD per month right now.

    • yourflights on 13/12/2023 - 09:49

      I know I will be living modest retirement in Australia with this kind of money however my whole point is to live in Bali/India for majority of year and live in Australia for only min period (required to maintain tax residency) so I can enjoy both cultures and lifestyle and continue to access Medicare here and also tax exempt (first 18K income per year)

  • yourflights on 13/12/2023 - 09:55

    Thanks guys. Really appreciated. Please keep sending your feedback.

    So far.. I got the common message that relying on property only (2 +1) may not be a good idea so I will think about 2 property (1 PPOR in Sydney and 1 IP) and investing the remaining in bonds/eft etc. .

    If I dont rely on IPs at all, I can do it this way in simple term..

    600K townhouse in Sydney and remaining amount available as FIRE corpus is 1.2 million and 250K super. When I put this amount in FIRE calculator, it can last for 30 years at 4% withdrawal, 4% inflation top up withdrawal each year and only 7% return (starting with 48K in first year to 150K withdrawl in 30th year). At the end of 30 year, I will still have sydney home (which may have gone to 1 million plus in value) and a million in super (250K starting super will become million in 30 years easy) and access to aged pension (if I am still alive at 80 years). Is this not achievable?

  • Bren20 on 13/12/2023 - 10:44
    +1

    I think you need to consider the downside risks further. Assume higher costs, and a 20% depression in property costs, how does this impact on your strategy? Does it just bring forward your return to your Brisbane unit? What happens if you get a chronic illness and need to return to Australia permanently or semi-permanently for care?

    • yourflights on 13/12/2023 - 10:48

      Great point. Hopefully that doesnt happen. 20% depression may put me in trouble however many million more in Australia will be facing same effect and I guess, that will make me (along with others) to come back to workforce from early retirement. I could not thin off any alternative for me to prepare for such scenario. Also, as I am not relying on capital growth, do you think 20% depression in property will also have similar effect on rental market? As far as my property gives me 4-5% rental yield, I may not be worried too much about property price being low (in depression). Also, I am not relying on property sale except my PPOR. As far as it gives me 1.5 million (it is priced at 1.5 million today and I am planning to sell after 5 years so it may go up by then. ) hopefully there is no depression in next 5 year so I can execute my plan. In fact, if there is any depression between me selling PPOR and buying IPs, i will be better off as I may be able to buy IPs cheaper

      • Bren20 on 13/12/2023 - 11:00

        20% depression is certainly unlikely but it may give you some confidence in your plan if you stop relying on optimistic projections and consider more likely returns, as well as low side returns. If you develop a reasonable 'worst case' and know how you will handle this, you can have some comfort that your plan is realistic. You might find that under your 'worse case' assumptions everything works out if you sell one of your IPs, which could be an acceptable mitigation

        I won't speculate on what a 20% depression would do, I imagine it'd be carnage / recession / job losses, which might be good or bad for someone in your situation.

        • yourflights on 13/12/2023 - 11:02
          +1

          Thank you. Very well said. I am thinking this way.. Right one, there is no sign of depression. If or when the depression comes, it will be carnage and millions will be affected. I think I wont have any right to enjoy retirement when so many more will be coming back to workforce. I will join the brigade and come back to workforce. I am confident of my skills that I will be able to find job in my field easily (not overconfident here but knows my strengths). My freelancing/website/IT/AI skill may come handy at that time.

          • Bren20 on 13/12/2023 - 11:18

            @yourflights: This is still optimistic thinking, in a major recession you will not be able to easily re-enter the workforce. Your skills will become outdated and you will lose your contacts faster than you think, and you'll be fighing against high quality candidates recently made redundant.

            I'd put the chance of a major recession over the next 30 years at close to 100%.

            • yourflights on 13/12/2023 - 11:22

              @Bren20: Thanks. I would agree with you. Even though I think my skills are valued greatly today, it may not be in future. Hopefully, there is no recession in next 20 years (for me at least). Anything after that, I will have to start selling my assets and keep prolonging my retirement as much as possible. In that scenario, my son may not get any property or asset from me then. As far as I help him with deposit and he has his own home, I am not worried too much about him.

  • Chong on 13/12/2023 - 11:21
    +1

    Is the rental market for where your current place good? I dont understand selling it to pay 3 lots of stamp duty?

    • yourflights on 13/12/2023 - 11:26

      Its definitely good but not when I combine rental income for 3 properties. I can rent my current home for 1000 a week (1.5 million value). With that 52K income per year, I can not retire. I do not want to stick to one PPOR worth 1.5 million for my retirement. Also, I wont have any home to live if I rent out my existing home. Also, its tax free today but if I rent, I will be paying CGT on the profit (500K as i originaly build in 1 mil) and it will reduce my retirement corpus when I sell this home.

      • Chong on 13/12/2023 - 15:42
        +1

        I think in your calculations you need to include all the other costs, property management, insurance, body corporate, council rates. owning multiple smaller properties is more headache and more costs overall, largely due to additional tenants and having 3 properties to upkeep and all the additional annual and biannual checks which really can be done by a regular adult, sure there are property managers but they "look after" 100+ other properties, so you still need to pay attention and look after your own properties.

        Also with tax my understanding is you don't pay tax for the period you have been staying in it. so get a valuation done and store a copy (electronic or otherwise somewhere)… also consult an accountant

        if the amount is for 2 people definitely should minimise unneccassary cost.

        I would suggest topping up super and ensuring you and your wife have max out your carry forward super contributions (people always underestimate the compounding effect of lower tax rate super has, expecially over 2 decades) and use the equity in current PPOR to invest if you choose to do so.

        just my 2 cents

        • yourflights on 13/12/2023 - 16:03

          All very valuable suggestions. Thank you so much.

  • trekbound on 13/12/2023 - 12:43

    OP your plan contains a lot of "pie in the sky" and best case developments. I haven't read the whole thread but for a starter I haven't seen what you are going to do after you retire. If you retire at 45 you may live 40 or more years.

    Your retirement nest egg of 1.6 mil seems inadequate for such a long time span. Many things can happen. The developing countries are developing generally faster so the cost of living is raising faster too. The legislation and visa conditions are constantly changing, usually for the worse.

    Your main issues as you get older would be health care and residency issues if you are not a citizen or a PR in the country where you reside. The older you get the more dificult and prohibitive the health insurance from the likes of Sigma and April becomes, to the point when the insurance is so expensive so is not worth it, or they simply refuse to insure you. ICU in private hospital in SE Asia depending on your condition can go up to 4-5K AUD per day, and medevac to Australia up to 150-200K plus.

    These issues are mitigated with enough funds.

    You need to take into account your tax residency status - if you are not a tax resident of Australia there is no tax free threshold, so at least 32% of your net rental income is going to the taxman. On top of that your new place of residence may want to tax you too, google Thailand and Portugal tax changes for expats 2024.

    Typing all this from Thailand in my 6th year of traveling, including 2 years Covid exile. I work remotely for Oz customers and getting paid in Australia, have an address and bills, so I keep my tax residence intact.

    All in all retiring overseas is doable, if you are willing to take some risks. There are plenty of Oz retirees in Thailand and Bali.

    • yourflights on 13/12/2023 - 13:13

      Thanks for taking time to provide such long and detailed feedback. Let me give it a go to answer one by one.

      • I am dual citizen so no problem living in Australia or India for as long as I want. No visa required ever. Regarding Bali, I need to take long term visa but I am sure Bali will always welcome OZ citizen (having access to Medicare) from coming. I heard they are planning for long term visa (10 years +) for digital nomads and I will fit perfectly in that category
      • I will always be living in Australia for min period required per year to maintain tax residency and medicare so I will always have tax free threshold and medicare.
      • I am an Indian citizen too so I can access their govt health system if I want. In case of a major illness, I will be relying on Medicare and OZ private insurance (if I still have it at that time). Not able to get insurance due to illehealth is always a problem for any old person (whether its me or anyone who is not retired)
      • Happy to hear about your Thailand venture. Encouraging for me to hear that many OZ retires in Thailand and Bali. How is your experience so far? 6 year is a good time you spent there so I can learn something from you.
      • I will always maintain my tax residency in Australia. That wasnt part of original plan however thanks to OZ bargain community who made that clear to me in my original post so I have considered partial stay in Australia forever and plan accordingly.

      Please continue to provide any other feedback. Thanks a lot

  • Eeples on 13/12/2023 - 12:48
    +1

    Life is what happens to you when you're busy making other plans.

    • yourflights on 13/12/2023 - 13:08

      So true. Isnt it? That is why I know that I can not control all variables and moving parts in my plan. In fact, no one can say with 100% confidence that they have their full future planned. Even though I plan as much as possible, there will always be some risk but I dont want that fear to stop me from planning. Thanks.

  • Aerith-Waifu on 13/12/2023 - 16:22

    Too much too read for Wednesday lol

    • yourflights on 13/12/2023 - 16:29
      +1

      Ha ha.. True. Get a coffee and start from my original post and then while you are seeping the coffee, slowly come to this page. You will get all flavors (not from coffee..) when you read those comments.. funny/interesting/surprising/scary/sad/happy/informative/useful. Good luck.

      • Aerith-Waifu on 13/12/2023 - 16:49
        +1

        Hahaha ok I go and get a coffee and absorb all that and see if I can come up with a one liner….lol

  • nurbsenvi on 13/12/2023 - 20:31
    +1

    The whole thing revolves around housing so much
    I would rather have half of the asset in ETFs

    • yourflights on 13/12/2023 - 21:45

      Great idea. Any specific suggestions in choosing the ETFs?

  • Poor Ass on 13/12/2023 - 21:37
    +1

    Go live in the sunshine coast with the rest of the retired boomers don't come to Brisbane

    • yourflights on 13/12/2023 - 21:44

      Ha ha. That mean, Brisbane is too good so you don’t want to share the fun !!!

      • Poor Ass on 13/12/2023 - 22:07
        +1

        Nah just not for ya retirement plans

        If ya want fun why not gold coast?

        Brisbane if ya working

  • surg3on on 14/12/2023 - 13:57
    +1

    absolutely no diversification. Probably wont bite you. probably….

  • dfg555 on 25/12/2023 - 20:54

    posts like these make me so glad i got lucky discovering crypto back in 2010

Login or Join to leave a comment
Login Join