Do the sums to work out how long your $1.8m will last

Scott and his wife have strong assets and want to retire early.

Q I am soon to be 60 and my wife is soon to be 59. I would like to know if we will be able to retire and access our super at the same time? Also, we have an valued at around $900,000 and two investment properties with a combined value of $1.3 million with a loan of $400,000 against them.

We own our own home in Brisbane but would like to travel while we are still relatively young. We also have three grandchildren who we care for before and after school. Both investment properties need a lot of work and we have been trying to keep the rent as low as possible for the tenants.

I would like to sell the investment properties, or at least one, and continue to live in our family home as we support two of our children, who are still studying. We would like to retire early but I really have no idea how to proceed and have been bitten by financial advisers in the past.

Damn. I am very sorry to hear that financial advisers have not worked for you, Scott. With about half of all advisers no longer in the industry since the Royal Commission into banking, superannuation and financial services in 2019, I have generally been getting much better feedback on advisers from Money readers.

Clearly, this is not your experience. So why don’t we take a shot at the big picture for you and your family? I reckon that to get solid professional advice any adviser will need a few hours with you and your wife. I only have a few paragraphs, but I think we can at least establish a general view.

You have net investment assets, super and investment properties of $1.8 million. This is important. The critical information I do not have is your projected spending. You can work this out, though.

At 60, if you retired and wanted to keep your capital intact, based on historical returns above inflation, you could spend about 4%pa. This is about $72,000pa.

Is that adequate? Sure, selling one of the investment properties, in particular if they need work and rent is low, sounds sensible to me. You may be able to top up your super.

If you retire or even have a major change and part retire, you should be able to draw a pension from your super. Take advice from your super adviser before you do anything.

The next big step is to run a model that reflects what you have now, looking at what would happen if you spent above $72,000 a year and you cut into your capital. This model could see you qualifying for a pension as you hit pension age and older. Even a part pension would help preserve your capital. It may be that you can spend more today and move slowly to part pension, supporting your capital longevity.

I am sorry about this, Scott, but apart from general guidance, I cannot give you the detail that is so critical to you. You will have some form of professional support around your super. Could that fund or firm help you model and crunch the numbers. Done on an hourly fee basis, this should not put you at any risk. Making the right ‘retirement pudding’ needs a great deal of information from you and your wife, in particular your cost of living, goals and objectives. Then so much more: for example, is part-time work possible?

My advice is to gather your facts, assets and liabilities, do a budget for future years and sit down with a professional fee-charging adviser, not someone who wants to flog you investments.