Retiring in Oz

[John Bertrand]

Hi all,

We've been pondering a bit recently about how we're going to retire in Oz. I'm 35, my wife 34, and like most South African's, we had a number of RA's back in SA, which would have (hopefully) covered us for retirement back there. But these won't cut it in Oz (seen what the Rand/AUD is lately?). Also, you can't claim any tax deductions on premiums on your RA's in SA, like you could when you were living there, ATO doesn't allow that.

Anyway, so I was wondering what everyone else is planning on doing for retirement in Oz? Currently, we have the usual super, and we're also contributing extra to it on top of the 9%, but even then, that's not nearly enough for what we'll need to retire. There is also the Aged Pension that you can get, but that's means tested, and only for people who basically have no assets/funds at all.

The backup plan might be to take all our dollars and return to SA on retirement age, but I'm not sure I'd like to do that, having been here for so many years.

Is it worth surrendering (eg. Cashkows) your RA's there, and moving everything here? I know a forum is no replacement for professional financial advice, just curious as to what others are doing.

John

[Robbie_P]

Hi John,

This is something that i have also pondered. You find that alot have people have immigrated to Australia between the ages of 35 - 40 years old. In order to fund their move here alot of these people sold their homes (often below their true values) as well as cash in order their pensions (like i did).. all this to pay for flights, containers and getting a very basic setup here in Australia (i.e. buying a car, appliances etc).

Now, after finally settling in here, you find yourself on the wrong side of 40 and basically 'starting from scratch'. I am not financial planner, but that leaves you with about 25 years left working to build up your 'nest egg'.

Although I'm only 30, there is no way i will be relying purely on my super for retirement.

Cheers,

Robbie

[candivw]

I have a reallyd good financial planner here, he has worked with us to move our super to another fund ( ie not the one the work provided which isnt a great one). For now we don't put extra into it but Ina bout 5 years we will be adding into it to build it up a bit more.

[John Bertrand]

Hi Robbie, may I ask, you said you don't think your super will cover you for retirement? How do you intend supplementing that? Property might be a bad idea in Oz (age old discussion about a crash), Shares are a no-no (pending Euro financial armaggedon), Term deposits = super low interest rates. That doesn't leave much?

[Gizmo]

This is a real worry. We entered the Super system here in our mid-late 30's as well. Its just too late in the day to expect enough to even retire frugally. There are a couple of ways to rectify it - either pay extra into your Super or invest additional money. Property is still a good investment because of negative gearing (major tax benefit). Instead of buying a big larney house, look at something more moderate (big house and big garden = lots of time spent cleaning, maintaining, upkeep etc). You don't really need a huge piece of land here as there are fabulous parks and other facilities for kids. Something smaller that you can pay off quickly then move on to buying investment properties which you can rent out later to supplement your retirement (there is a huge demand for rentals over here).

[Robbie_P]

@John, i still have a fairly large property portfolio in South Africa, so once those bonds are paid up there should be a decent amount to cash flow to live off. I intend on doing the same in Australia (which i have started doing) i.e. building up a property portfolio. I have never been one who worries to much on 'equity growth', my decision are made on the cash flow (buying with positive cash flow or neutral cash flow at worst). With that in mind, 'property market crashes' have never affected or concerned me.

Along with the above, I will also be putting away my 9% into my super.

[Tsunabi]

This may be wrong of me but my kids will know from a very young age that they will unfortunately have to help their parents in their old age. We came over to this country to give them better opportunities in life and the price for that was our pension money. We have life insurance that we will maintain till we die so one day they will get some $$ out of old mom and dad ;-) but till then they will have to make a contribution since our super will be waayy to little to support us.

Please note, this is our situation and our feelings. If you feel different, good on you :-)

[Gizmo]

I agree with your line of thought Tsunabi. I was brought up in the same way - if my parents and my inlaws need our help as they grow older, we will help as much as we possibly can! I certainly hope that my kids would feel the same.

[John Bertrand]

Well, it looks like most people are opting for property then as way to provide additional income. We'll probably do the same, but I want to see what happens in Europe and in the Aus housing marketing in the next 2 years.

@Tsunabi, I understand your point about getting the kids to support you, but I would suggest you also have some sort of backup plan in place, just in case. The kids might decide to go an work in some other country , or perhaps they're out of work for a while when they're older (anything could happen). Just something to keep in mind.

[Robbie_P]

@Tsunabi I think thats all good in theory, but what happens if your kids are not financially in a position to support you when you older? What happens if something happens to your kids? What happens if your kids decide to become beachbums and live off the goverment?

Me, personally, wouldnt like to put my retirement plans in the hands of someone else. Ideally, you want to build wealth and pass it onto future generations, not prevent your kids from building wealth because they need to support their elderly parents.

[RAD]

Personally I think both these options need to be considered. If we are able to, then we should look at supplementing income in our old age. However I think that kids could also assist parents in their old age like we do with our parents. This thinking has come from the fact that hubby and I appreciate all the sacrifices that our parents made in order to give us a better life and while it is not expected I would like to think that our kids will consider this. I also think that we owe it to our kids to teach them to be financially savvy from a young age as well so that they can plan and prepare for their financial futures.

Interesting thread John

[SimonS]

I would opt for the property option. We are thinking of using our pension from this side to put down as deposit on a small flat, and then rent it out just to get into the market. We would buy this in a place where rentals are high in demand.

We would then opt for renting a place to stay because after all we do not know where in Oz we might end up but we can not wait for a place to settle before we buy.

Reckon the income generated from 2 flats should be enough of an additional income to pay daily living expenses if you have no debt or a house bond. I mean what does a flat go for now......$Au300 per week? In today's terms one should be able to buy your food and pay your council fees etc. from that?

Or am I dreaming? Should be possible seeing we do not have to spend so much for school and university fees!

[Karoogypsy]

Very interesting indeed! I was also wondering about the same thing. We are settling in Oz at the age of 47. Selling 'nearly' everything on this side to make it on that side. We will only make the move in Dec 2012. We are keeping a small farm and two houses in RSA. ( Not worth much in todays terms) We will both be working in Aus and trust we will be earning enough money to safe up for our retirement. We are going 'in' on a contributary parent visa which cost nearly one million rand! This takes a big chunk from our retirement savings but we have to believe we will be able to make it in Oz........even if we start there with nothing. How much does it cost to retire? is the question. I know there is no defnite answer and that it depends on ones circumstances. Maybe there is someone on the forum from Oz that could clear this question.

[KangaRoux]

@ Tsunabi As you mentioned everyone has their own opinion and I keep that in mind, but your kids are not supposed to support Parents it might of been like that in the olden days but times have changed! Kids should build their own lives and spend their money on their own kids not blowing the hard earned on parents that made some wrong choices!

And they definitely owe no one nothing for bringing them to another country, you make it sound like they owe you something! Your duty is to look after your children not the other way around!

I am sorry if it sounds aggressive it is not just my opinion!

[John Bertrand]

@Karoogypsy - contributory parent visa costs 1 million rand!!! Geez, that's crazy. Do they gold plate the visa in passport, and stud it with diamonds?

I'm living in Oz, and can give my estimate for what you'd need to retire (happy for others to correct me, this is just my take). Per month, assuming no debt, and that you own your place, for the 2 of you:

$750 for food

$120 for electricity

$300 petrol

$130 car and home insurance

$70 internet

$50 water

$120 hospital plan (lets say $200 for comprehensive) (you dont have to have this, strictly speaking, Medicare would cover you)

$200 clothes, general entertainment etc.

= $1820 pm, lets make it $2000. And that's at today's prices, who knows what it'll be in 20 years.

So you would need a passive income to cover this. 2 x rental properties would do it, not factoring income tax into account. You'd also have your super, which would pay a bit, tax free. The only problem, of course, is getting the 2 rental properties in the first place.

Also, check this out, it gives a really good idea of what you'd need:

https://www.amp.com.au/MyRetirementSimulation/showSimulator

[John Bertrand]

Forgot to mention, if you REALLY have nothing to retire on (see my first message in this thread), you could qualify for the Age Pension:

http://www.humanservices.gov.au/customer/services/centrelink/age-pension

It's $2096 per couple per month, so not far off the mark on my estimate. That's what the government reckons you'd need to retire with.

[Tsunabi]

John, I realise anything can happen. However a backup plan is a luxury that not everyone can afford. Hubby and my joint income potential (seeing as I only want to work halfday to be there for the kids after school and we started late with kids) is only $120 000 p.a. b4 tax and other deductions and then school fees of $14 000 for 2 kids (we choose to go pvt school) and then other stuff like medical, insurance, phones, internet and if we are lucky maybe we can afford one bond and buy some food, backup plans are, for us, a luxury that we cannot afford.

I will try my best to raise my children with good financial knowledge as well as the notion that they will first go to varsity and study after which they can do what they want. Also the idea that they might have to help us financially doesnt need to be a burden on them, in this country if you study and get a decent job by the time you are 30 you can put a decent deposit down on a house and live comfortably (knowledge gained from discussions with some "20 somethings" ozzies.) I am not expecting them to carry us financially but we will need a couple of hundred $ a month to come by. Also I dont mind working till I am 70 if I live that long and am able to.

Aaaaanyways...enough from me and our retirement plan. Sorry for the long post/slight rant :-)

Cheers

T

[miraclebabycaw]

Being on the receiveing end as a child that has to look after a parent I have to say there is no way in hell I would ever force that on my kids. Yes it would be great to be close enough to have great relationships with them, but don't ever make them feel like they have an obligation to support you. Mine is unfortunately not due to poor planning on my parents part. My dad died when I was 3 in 1974. He had life insurance, they had a paid for house and everything, but what was a lot of money in 1974 was worth NOTHING by 1984. Yes my mom made a few bad decisions like immigrating to the US to be with her sister which did not work out and that wasted money. She also grew up in the war in the UK so had to leave school at 15 and had no education. All she could get work at was as a switchboard operator. She did her best through the years despite this and I never needed the basics. She got done in by her company that she had worked for for 18 years...at 62 they changed from a pension to a provident fund, and at 63 they retrenched her (their retirement age was 65) so all she got was a lumpsum payment, no pension, no medical aid. Thankfully I had been married for 2 years by then and hubby and I were looking at buying our first house. We found a house where we could build a granny flat on. That was 12 years ago now. Mom now has virtually no money left (her provident was PENUTS) and we feed and support her every day. She pays for a hospital plan. It's VERY taxing on us, both financially and emotionally, and at the end of the day even though she is my mom and I love her to bits, there is still that resentment that brews at having been forced into this sort of position. Not only do I have to consider my 2 kids in everything I do which I chose to do, but I have to consider my mom as well which was not a choice. If we had not taken her in she would be on the street. No way I will ever put any of my kids through that and end up with them hating or resenting me because they didn't have a choice in the matter.

That being all said..I belive property will always be a good investment if you buy at the right time. We are cashing everything in here in SA. Our RA's we have set to paid up and we are currently just putting the payments we were making into a savings account till we leave in Dec. Our RA's we will apply for once all monies are paid out and we are happy that our bank accounts can be closed. The government is already making noises about a state pension and taking all private pension funds and putting them into a government funded one. Might sound like science fiction, but then so was a NHI 10 years ago. I'm not taking any chances thank you. Our plan is to buy property asap in an up and coming area that needs rentals, and rent that out for a number of years. Hopefully down the line we will be able to purchase a second one that will help as well. We will also try make the additional 7% payments into Super like we do in SA for pensions.

[Karoogypsy]

Thanks John Bertrand........ yes i know it sounds like a lot to pay but for us every cent worth! We do get about 14 000Aus$ back after ten years but that is a small drop in the bucket :-( the balance go towards Centrelink and Medicare as Immi says we are to old to contribute to the system and to young so we can still drain the system ........)

Looking forward to the challenge .........we have twenty years left to do it.

[Bronwyn&Co]

Or retire in Thailand, where it apparently costs $30k a year to live....

[HansieSlimBergWilKlim]

Or retire in Thailand, where it apparently costs $30k a year to live....

Spot on. That's exactly what we have done. We arrived in Aus in 1989. My husband was 40. We had no savings. We had a few RAs etc but nothing to write home about. Those have since been cashed in.

The last 24 years we worked so hard that we managed to put away a fair bit of super, pay off our house and put one child through a boys only private school. He is now at university. At the beginning of this year we rented out our house, put our most treasured possessions into storage, sold our cars and moved to Northern Thailand. We are loving it. Wonderful weather if you like the heat, first world conveniences, super cheap internet, good health care, friendly people, great food, and a very very easy way of life. We have found most things to be about one third of the cost in Australia.

[Bronwyn&Co]

@Hansie - I think this is also our plan, as we are in our 40's with very little Super, our Rands aren't going to cut it here ;-) roll on adventure number next. I'm glad to hear it's working out for you!

[HansieSlimBergWilKlim]

Forgot to say, we brought the dog too! No quarantine :-)

[RosFam]

Very interesting topic that has lots of creative solutions to the problem of having enough money to retire on. I am in the same boat 38 years old and have thought about this problem deeply (lying awake at night and not sleeping) and have always believed in building passing income through whatever means possible. For me a move to Auz would be final and i have no interest in leaving or coming back to SA, why leave in the first place then. I don't see anyone speaking about the possibility of starting their own businesses in Oz to supplement income and possibility build something that has value one day. I havent left SA yet but the general feeling from this thread is that most have accepted that they will not have enough to retire on. That is scary but I guess less scary in a place like Oz where there is some government safety net.

[Tsunabi]

Oohh, ok, now we have a back door!! Thailand! Thanks Hansie! Sounds like we might see a couple of forum members there ;-)

PS: Justbfor the record, I would never want to life with my kids one day, I dont think anything good can come of that. There is however a very big difference between a child helping parents out to the tune of $250 per month once they are settled, sorted and able and having to completely support them.