Retire on $80,000 a year
Noel is on track with his strategy to ...
QIam 57 and working full time while my wife is 58 and not employed. We have a combined super balance of $347,000 and I am doing pretax super contributions to the maximum. Our debt-free home is worth about $1 million. We also have a debt-free rental property worth $700,000, which is security for a recently purchased $720,000 rental unit. So what now? With a goal of maybe $80,000 a year income and considering the commonwealth rules (CGT, age pension, etc) is there a “best practice” recommended strategy to retire for couples like us?
Good question, Noel. I like the “best practice” reference! Here I think you are practising what I would call best practice. At 57, salary sacrificing into super is clearly “gold standard”. As you would be well aware, it means you are paying only 15% tax on your contributions to super. You mentioned you are making the maximum contribution, which has just dropped from $35,000 a year to $25,000. But it does tell me that an aged pension is not going to be part of your plans, unless you stop work very soon.
You both would not qualify until you are 67. Your super will be growing rapidly and over the next decade it is pretty reasonable to assume your rental properties will be worth a lot more, and your rent will be higher. If you were to work to 67, that would see an extra $250,000 going into your super. With your current balance and extra contributions growing over the decade, this would mean your super is likely to be worth close to $1 million. If your properties grew at a very conservative 4%pa (that is historically really conservative) they would be worth some $2 million.
Even if the $700,000 or so of debt on the second investment property is still there, that would still give you assets of some $2.3 million. A decade of inflation means that your $80,000 a year would have to be around $120,000 but a 5% earning rate on the $2.3 million would do the job for you.
The problem here, though, is in terms of “best practice” I am scratching around on the back of an envelope without enough knowledge of your plans and that is really poor practice! I’d really like you to go to an online retirement planner, such as the one on ASIC’s MoneySmart website, and do your numbers based on your own knowledge of your situation. Seek advice if you think you need it.
In short, though, I think you are on track to meet your goals.