Property Investment & Retirement
How many properties do I need to retire?
With the government strongly encouraging, in fact mandating, self-funded retirement for the majority of the population; the burning question for many people in the workforce, is how much will I need to retire comfortably?
As working professionals, we strive to build a nest egg that will enable us to enjoy our retirement. Laura Menschik CFP, Director of WLM Financial Services says in general people should anticipate needing between 70-80% of their pre-retirement income, in order to maintain the same standard of living they are used to. This is not taking into account increased travel in retirement and upgrading the car every few years; more needs to be added in if you are planning a lifestyle beyond what you currently have.
One of the most effective ways to grow finances is through a passive income stream. For everyday Australians, living off a property portfolio’s rental income is a particularly appealing option. With property research, guidance, and professional advice, a solid portfolio can be built, generating and sustaining an attractive yield for a long period of time.
How much income do you need?
“For Australians looking to retire at the age of 60, the average male has a super balance of $292,510 and the average female has a super balance of $138,154. From age 60 to 64, at the minimum pension draw-down rate of 4%, a couple’s combined super pension income would be approximately $17,226,” explains Financial Advisor Dominic Aarsen.
“From 65 to 74 the draw-down rate increases to 5%, meaning a combined pension income of $21,533.” The roughly estimated budget for singles to have a comfortable living is about $40,000 per year, according to ASFA, whereas for couples without children it is approximately $60,000.”
While this takes usual needs into account, it doesn’t factor in many of the luxuries you typically want to experience upon hitting retirement, like travel, eating out, engaging in hobbies, or perhaps upgrading your home – nor does it consider emergencies such as illness or accidents, which can eat up a sizeable chunk of your savings in a very short time. This is where investing in property can help you significantly.”
“With an investment property in addition to your super balance, an average weekly rent of $500 would add an estimated $26,000 to your annual retirement income. Combining the minimum pension withdrawal of $17,226 with $26,000 from your rental property results in an annual income of $43,266,” Aarsen says.
“There are different price points you can enter the market at. Your job is to find the best locations that will deliver the best returns.”
Here at Laing+Simmons Quakers Hill/Schofields, we are area specialists and can assist you with advice on what type of property to purchase, and where, to maximise returns and long-term capital growth. It’s never too early or too late to start thinking about retirement, and bricks and mortar have stood the test of time as an investment fundamental.