Retiring in Oz

[Sibella]

Why retire? Don't think we could afford to. My inlaws in Cape Town have a small guest house in Betties Bay, maybe we could do something like that in Oz one day.

[Bronwyn&Co]

@Alan I think you are right, it's less scary retiring in Aus than SA. At least here there is some Govt help. But pensioners here are 'doing it tough' (taking strain) too. But not to the extent of standing at a traffic light with a cardboard sign...

As for the business idea, been there done that, not losing any more money, thanks very much...we came to Aus on a business visa & it was 4 very cr@ppy years. You have to pay your employees far more than you can afford to pay yourself, there is a huge amount of paperwork, legislation, insurance requirements, occupational health & safety concerns, etc. There are -obviously- people who make money in business here, but it's very difficult & you usually have to work hard in the business yourself. Just IMHO.

Edited June 26, 2012 by Bronwyn&Co

[miraclebabycaw]

@Hansie..people we know are doing this to Singapore. Their son is in Singapore working. He has rented and awesome place for them right on the beach. They are expat Brits who have been in South Africa for the last number of years, have pretty good pensions, but have said it's so much cheaper for them to be living in Singapore than SA or anywhere else. What a life. Good for you!!!

[Bob]

There is a certain irony in my case.

I am retired . . . . have been since May 2006, when I turned 55 . . . and I'm reading this on my wife's Apple MacBook in our 18 foot (5.5m) caravan on the Gold Coast, just below Brisbane in Queensland, before we trek off further north to the tropics.

We are visiting one of our daughters who lives just up the road. We come back to the Adelaide Hills, the rolling countryside to the east of Adelaide, in September.

I am living the retirement that you are all heading towards later on in life.

I began to plan for my retirement a long time ago, when I was about 30. The moral is that if you don't plan, you are planning to fail.

This moral is true for most things in life, be it retirement, or business, or buying housing . . . . . or losing weight!

The biggest factor to my financial well being is having paid off my house. I went into retirement with no debt.

You cannot retire owing six figures to the bank still and expect a happy time with money to do all you want.

Life doesn't work that way!

You have to keep in the workforce until your house is paid off, or at least you have the funds elsewhere to pay it off.

Next factor is an income stream.

Until recently, most Aussies just thought in terms of working till 65 then going on the Old Age Pension until they died.

This began to slowly change in the mid 1980s when the Australian government started to means test every old person. If you had too much money in the bank, or had too much in property or shares you lost out on your pension. The family home where you lived was exempt, but not much else.

There were simply too many old people claiming the Pension, and modern medical advances keeping them alive longer, for the Australian workforce to afford them all a full pension.

Previously, up until 1986, just about any Aussie woman over 60 and bloke over 65 got the Pension. That is no longer the case, and you'll have to be on a "bread and dripping" lifestyle in future years to get one. It will become tighter and tighter to get a full pension as the percentage of old people in the overall population increases and live longer. . . . . and cost the government more and more.

At the moment, the Old Age Pension kicks in at 64 for a woman and 65 for a bloke, but anyone born after 1952 will have to keep their noses to the grindstone until they reach 67. I reckon that the Australian gov't will increase that also, to 70, in a few years' time, just to save $$$ billions in pension costs and health care costs, let alone residential care costs for old people.

Most Australians had no superannuation to speak of until the Australian gov't started it off for all workers in 1988, at 1.5%. It quickly rose to 3%, then 5% and now stands at 9% of a person's gross income going into their super fund and is set to increase soon to 10% and 12% by the end of the decade.

This is good news if you started saving back then, but most South Africans take an enormous hit financially when they first come to Australia, setting them back 10 years or more in a lot of cases.

Paying "voluntary contributions" into my super fund, up to $1 000, from my nett money (money I got after I'd paid income tax on it) also got me a top up or "co-contribution" from the Australian gov't after I'd submitted my tax return and the ATO tax office had worked out my income for the financial year.

That helped increase my superannuation no end without too much suffering, as anyone in finance will tell you that long-term compound interest on your money is a powerful force.

The superannuation environment is a tax-free environment, so no income tax or capital gains tax is payable on funds you earn whilst it's in a super fund.

If you have years on your side, then quietly let your super grow and sit back and watch it, keeping an eye on the returns each year.

Others may like to get into property to watch their investments grow, or get into shares directly themselves.

The main thing is to have a plan.

Also, I am a keen gardener and "Mr. Fixit" . . . . so I keep my costs down by growing most of my veggies myself, and changing the oil in my car myself, as well as fixing the odd jobs around the house.

I have no water charges since I live on acreage and have rainwater tanks that last me all year in rainwater.

Likewise, I coughed up $13 000 to install solar panels for electricity, which have let me have free power for all my household needs and a $1 500 cheque for the year for selling electricity back to the state grid.

Things like this can keep my expenses down, since a "penny saved is a penny earnt", as they used to say when I was a kid.

My wife's and my income stream is sufficient to let us travel around Australia in the winter-time for up to six months and we're looking at the possibility of travelling around England and Europe for six months each year, if the financial turmoil doesn't end up in unrest over there.

I think most Aussies I know have a reasonable lifestyle with the little bit of super they've managed to build up over the years, and contribute to themselves, especially when the kids are grown up and leave home, as well as having the security of being able to fall back on the Old Age Pension if they get too cash strapped. A couple get $524.10 each a fortnight (A$1 048.20 together) from Australian gov't as a full pension, if they have no other savings or superannuation to rave about. That works out to around A$27 000 a year for a couple. A single person living alone gets 60% of that figure.

I help my kids thro University, but once they are in the workforce earning a good income themselves, it's not my responsibility to keep them any longer. My folks didn't keep me once I got married. My kids will inherit the family home and have any savings in my bank account once me and mum are gone.

Edited June 26, 2012 by Bob

[Mara]

I see that there are a few of you that think it would be detrimental for your children to assist in your support in your old age.... Well hubby and I are another couple that may well have to go down that route. We were 44 when we migrated, after arriving in NZ we put our youngest child through university and the eldest through university for his masters. Before we left RSA we had a family discussion about the costs and the fact that with the costs of leaving RSA we may well have to ask for our kids assistance in our old age, both sons were quite happy with the circumstances, then 18 and 24. We do not feel that we are on this earth to enrich our children, we gave them both a free and excellent education for them to make their own way in the world. We are proud of the adults that they have become and although it may not be necessary to call on them in our old age I know that they will both be happy to assist, should the need arise. After all, with a sister and brother, we took care of my mother for many years in her old age, it was a privilege and definitely not a burden. I raised my sons to be caring people, and to feel compelled to assist those in need, the same way that I have done for the past 19 years for those arriving from RSA.

[Oosie]

Great post Bob, thanks. We came to Aus 4 years ago, my husband was 52 and I was 47. I did not work in South Africa, looked after the kids and never went back to work. My husband is an accountant and is still doing accounting work here in Ballarat. We used all our money to come to Aus and had just enough for a deposit to buy our first home. Two years ago we bought another property and is renting it out and today I start with a course "Certificate 3 in children services" to work in child care or a kinder. I'm almost 52 years old now and am so blessed to be in a country where I can still start with studies on this age and have a good 10 years or more ahead to work and contrubute to our savings for our retirement. We are looking into buying another investment property this year or next year, at this stage of our lives we think that is the best way of providing for our retirement. We also pay more into our home loan to get that paid of as soon as possible.

All the best to you all and everyone still on their way.

Linda

[Bronwyn&Co]

It's very interesting and helpful to read everyone's take on this. I think, Bob, your plan sounds excellent. I started saving for my retirement at 17! Yes, I started working full time from 17 and contributing to a company pension fund (like super). A couple of years later I also started a retirement annuity, as well as having a savings account with a small monthly transfer going in, so it could quietly build up, even though I was on a low salary as a young person with only year 12. I bought my first house at 21 and traded up at 23. By 30 I had 3 townhouses and a family home. I cook from scratch & am quite frugal in some ways. However, at age 36 that all changed with a little thing called the Zar/Aud exchange rate and a very expensive visa We have seen our savings virtually dwindle to nothing and I admit, made a few crappy moves along the way. Losing $75k in last year's floods has cleaned out what was left (in spite of us believing we were insured on QBE's top plan, and govt assistance nil as we were means-tested) and we are back to where we were in our early 20's. But we will get there again, like we always do, and I refuse to let scare stories from Europe bother me. Tough times often present interesting opportunities.

[AndreaL]

Interesting topic.

You know it's noy always about parents making wrong choices that means they may have to rely on their children for help. Things happen that often you can't predict and there are many of us who in South Africa had a month to month existence and din't come here with the luxury of proceeds from a house or RA's.

When my parents emigrated to South Africa from the UK with £50 in 1982 they probably knew they were never going to be comfortable, but did it so at least their children would have opportunities and work, especially as the mining industry, which most of my family worked in, collapsed.i can't count the number of times over the years that my parents or hubby's have helped us out and feel it is only right to help when are where I can.

My father retired at 50 because he has black lung from working in the mines since he was 15, he put a lump sum of his pension into a townhouse in Cape Town and my brother pays the bond, he lives next door in a shared house with his girlfriend and anoth friend. For them the situation works, they have a home for as long as they need and one day it will be my brothers.

In the reverse situation, my husbands parents, also migrants, but from the 70's have always been better off than my parents, their house is paid off, but he still has to work at 68. He did all the right things and took out policies, including a hefty one with the company he had spent the last 10 or so years with. Recently the company owner and his wife divorced, very acrimonious, he declared bankruptcy, and all the best laid plans of father in law have fallen apart. The company owes him hundreds of thousands of rands, including a retrenchment package, but he has basically been told that he will probably never see a cent. They are in dire straights and may be forced to sell their house. They had thought of selling and moving to a secure unit, but the prices are as much as a house in the area they live. We all know that you can't survive in South Africa without an income and the aged pension there is nothing.

We are currently looking at options to try and help them, but he is a very proud man and won't let us know exactly how bad it is, I fear for his health and don't think there is going to be a good outcome.

My parents have just been on their first trip to the UK and it looks like my Dad would be keen to go back, he is very worried about what is going to happen in South Africa, and that they will be left with nothing if the current government has their way, but my Mum feels Cape Town is her home and doesn't really want to live in the cold, wet UK. I would rest a little easier if they were, especially since the old lady next door was robbed and beaten and has never really recovered and has gone into an old age home.

My parents went to South Africa for their 4 children, now I live in Australia, my sister lives in Ireland and my 2 brothers are still in RSA.

Hubby and I are in our early 40's and effectively have started over with nothing. We're trying to get the funds together to get into the property market, have taken out a large ( and expensive) life insurance policy, so that if something happens to hubby, I will have enough to at least buy a comfortable home- as this is another worry when you are in a country with no family support network. We are trying to make sensible decisions, but without a crystal ball ( and a slight worry with what is happening elsewhere in the world) can't predict what might come.

There is no easy answer to this, some of you will be fortunate enough to be self sufficient during your life in Australia and some won't, so we shouldn't judge one another's situations.

If my parents or hubby's need help, it will be my privilege to do so, they mean the world to me and made huge sacrifices to try and provide safe futures for their kids.

We will try and make the right choices, but can only work with what we have now.

Edited to add, please excuse spelling, this iPad has a mind of its own.

Edited June 26, 2012 by AndreaL

[g26130]

To clarify the pension. There is a part pension and a full pension. In both cases you can live in your own home and own a rental property and still get a government pension. There's also seniors cards for medical and for public transport. There's also housing commission although I've heard mixed reports on this. Some friends transferred their house to their kids. Had to wait 5 years then moved into housing commission and loving it. I have another friend who grew up in housing commission and thought it sucked as the government doesn't maintain it.

I'm not a big fan of superannuation. I have a friend who retired as a brigadier general. He was in the army for 40 years and reckons his super is worthless. He's gone back to work. Some of my friends at work are well in their retirement age but can't afford to retire as the GFC has destroyed their super.

I figure there'll be another recession in about 20-30 years which would wipe out my super.

I've got investment property which I expect to be paid off in 20 years after which it should generate about $1500 pm. None of the political parties have any strategies for building more houses and there is no indication of any exodus so I'm confident there'll still be a big housing demand in 20 years. I'll probably be on part pension but I think I'll be comfortable. I'm certain I won't be a self funded retiree. To achieve that you and your partner have to be high earners (>$120k/year each) and childless. I only have one friend that fits into the category.

[Superkruz]

Spot on. That's exactly what we have done.

I believe the retirement visa must be renewed annually and you must report to Immigration every 90 days. Are these requirement a pain in the butt or are they fairly easy to comply with?

[HansieSlimBergWilKlim]

I believe the retirement visa must be renewed annually and you must report to Immigration every 90 days. Are these requirement a pain in the butt or are they fairly easy to comply with?

Hi Superkruz. I guess this is not really the forum to be discussing all the boring details but in a nutshell the 90 day reporting process will cost you 2 hours of time every 90 days. Some provinces have the facility for 90 reporting by mail. As for the annual retirement extension, we go the easy route and get an agent to do it for us. Of course you can quite easily do it yourself. They require a few photos, some copies of your passport and a letter from your embassy to say that you have the required income. We have not found it to be a hassle. Neither have the thousands of other retirees from all parts of the world. One thing to remember though is that you should always keep enough in the kitty in case things change and you have to head back. Our property in Aus provides this security. Do at least one LSD trip and do lots of research before you decide.

[Gizmo]

Hansie - how does the medical side of things work? If you are aging, your medical requirements do go up. Are you still eligible for Aus medicare or do you take out private medicare policies over there or is medical care reasonable and affordable?

[Bronwyn&Co]

Hi Superkruz. I guess this is not really the forum to be discussing all the boring details but in a nutshell the 90 day reporting process will cost you 2 hours of time every 90 days. Some provinces have the facility for 90 reporting by mail.

Wow this sounds like you are reporting to your parole officer ;-)

[Bob]

When you retire in Australia, you are entitled to get a pension if you don't own much. The family house is exempt from any means test.

The means test kicks in at around $250 000, so if you have more in super, shares, savings, property, gold bars, diamond tiaras, etc., etc, you lose a proportion off your Old Age Pension.

You don't qualify for the full pension if you own over the threshold, but still get a "part pension".

This cuts out completely once you have assets (other than the family home where you live) over A$1 000 000 (ZAR 8 500 000)

That is a lot of loot that the Australian gov't allows you to hold, and still qualify for a part Old Age Pension.

Frankly, if I had a million Aussie bucks in assets, I wouldn't bother about a pension to see me by.

Anyone not getting by with a million bucks behind them must be a spendthrift par excellence.

Once you get over a million in assets, you lose the right to a pension, until such time as you get below a million, so the obvious choice for all those hard up millionaires is to go on a P & O Cruise on the Queen Mary for three months to lose one hundred grand, or so!

Tough choice.

Having a part pension still entitles you to get a Commonwealth Seniors Health Care Card, which allows doctors and specialists to "bulk bill" you so that health care is free, you get 1/3 off the rates and taxes on your house, you get a rebate each time you register your car, Free bus and train travel around the city, cheap movie tickets to see a film at the cinema ($9 instead of $16), free cup of coffee at Gloria Jean's Coffee Shops around Australia on Mondays and Tuesdays, 10% off caravan parks when you travel around Australia . . . . the list just goes on and on and on.

Anyone not being able to get by in life as an old person in Australia, frankly, needs to see what previous generations had to get by on and realise they have it soooo good nowadays.

My grandmother in the 1950s got by on $8 (4 pounds) a week . . . . full stop. No freebies. No free bus travel. No cheap movie tickets or free cuppa coffee during the week.

Retirement in Australia is "LG", so all those thinking they need to make their first 20 million before they can feel "comfortable" are putting an unnecessary noose around their necks, since you can comfortably get by on $40 000 a year, assuming you don't jet set to Paris three times a year, and are happy to live at home mainly.

[humwill]

Does anybody know what the state pension one would get per month if you were a pensioner with no other income? like in S.A. it is +- R1300 per month

[miraclebabycaw]

Does anybody know what the state pension one would get per month if you were a pensioner with no other income? like in S.A. it is +- R1300 per month

As per Bobs post on the 2nd page....A couple get $524.10 each a fortnight (A$1 048.20 together) from Australian gov't as a full pension, if they have no other savings or superannuation to rave about. That works out to around A$27 000 a year for a couple. A single person living alone gets 60% of that figure.

[nicse]

However you look at it, it would be far better off to live in not so good neighbourhood to start with for a year or 2 while you save up a nice deposit because your rental is cheap. That would give you a much better start. Then you buy a place in a okaish area and pay the thing off in 5 years, then move on to another and another. My calculation tell me that my age 35 now, if I do this I will be able to accumulate 3 or 4 rental properties plus the one I live in by age 65, pending that I am able to keep on getting an income.

Taking the cost of living and the example of the income, if you get 120 K per annum that about 7200 per month after tax about, that leaves you with about 2700 left over also including a rental in your monthly cost. Remember that the rental falls away once you have your first property. That give you about 32 thousand per year, if you take a bit off for holiday, say 22 K, you could put that into your mortgage, any bonuses etc that you get and wow, a bit of hard work here and there, find some other income, you’ll soon be styling.

So if you look at the bigger picture, say you now have your 4 rental places at age 65, giving you say 325 a week, that about 67 K a year, plus say a super for about 10 K. Take 30% tax off your 67 K, that about 50 K a year about 4000 a month in today value. Don’t forget you also have the capital in the property. I would rather say to my kids, look we not in a position to pay for your university and private school, but hey work hard, pay your studies and when we snuff it, guess what, you get these properties of ours.

But the problem is that people with an employee mentality, tend to want to live in a top neighbourhood, drive nice car, go for nice holidays, wear latest brand clothing and waste their money instead of saying, hey here a great challenge, what am I going to do about this, let start a business or make investments, they too scared of the unknown and that is why most people end up with nothing in the end, worry about stuff they can’t do anything about.

A famous quote that I read once and sit with me, either you mind somebody else business or other fools mind your business.

Money like a flock of birds, if you try to catch the birds, they fly away, if you sit patiently the birds will come to you.

[miraclebabycaw]

@nicse...my only concern with this is what do you consider a nice deposit. If you can only get an 80% bond you are looking at on average 80 - 100K for a deposit on a reasonable 3 bedroom house....Now how the heck do you save that in a year or two. Even if you have 2000 a month left over that is still only 48k after 2 years. Lets face it, not everyone is going to be getting 120k a year at age 35...we would all like that but let's be realistic here. If both partners are working, you might be there..

That all being said, I do believe property is one way of making your money pay for itself.

[Jacques Voogt]

Oh, WoW! Very interesting topic. I'm no financial guru, so take this as my opinion only.

So here is my zimdollar's worth.

One of the reasons, and there are sooo many, that we are immigrating is the fact that we will be earning more in international monatary value and be able to save more while having an actual possibility of a future for us and our kids in a fairly safe environment.

I personally believe that you should not have all your eggs in one basket. Invest in housing. Invest in funds. Invest in a small business.

I bought my first house in RSA in 2006 but have never stayed in it. I rented a 36m2 bachelor's flat to live in and rented out the 3 bedroom house. The rent did not cover the bond and I had to pay in an additional R2000/month or so. So essentially I was "buying" it for R2000/month until the rent increased over the next few years to cover it. Right now, the tennants are paying the bond and I pay TAX on whatever is left.

To me it makes sense. The bank buys the house with their money and registers it in my name. The tenant pays the bank. After 10 or 20 years, depending on if you payed profits into the bond or not, the house is fully yours. So now you have the capital gain and monthly income on an investment for which you did not really pay much or anything in the first place.

Now I have not checked the Aus TAX law yet, but I am sure, considering the property is handled as a business, interest on bonds would be considered an expense and would be deductable, right? I have read somewhere that you actually have to register for an ABN (business number) and pay tax if your properties bring an turnover of AUD75,000 or so a year.

My only mistake, is buying the 3 bedroom house that the 2 of us are living in now on a bond. I have to pay the bank and I cannot claim the interest and maintenance expenses back from tax. In Aus we will stay in a small... no, tiny little relatively cheap place again. You should not have a bond on the home you are staying in... ever. Continue buying properties and have tennants pay for them but NEVER make use the rental income until you retire. In 40 years your tennants should be able to buy you at least 4 houses if not more. Considering that people will spend 25% or so of their salary on housing you can expect an amount from rental income equal to that of the avarage person or family staying in your houses. This rent will also increase with inflation every year to cover your increased expenses. When you die your kids will inherit 1 or more each putting them to a huge advantage when their retirement comes.

Remember also that more people will be able to afford a R2000 flat than say a R8000 house. In addition if one tennant stops paying you will not have such a huge impact to absorb. So with house I mean 25% to 30% of your salary. This could mean 2 flats instead of a house. Maintenance is usually also a lot less on flats than on houses.

The worst thing to spend money on, is a car. I have never owned a car with less than 148,000 km on the clock and I have never paid more than R70,000 for it. Sure, I don't get to shine with my fancy 4x4 Fortuner and I have to maintain my car myself, but it still gets me to work and back and still burns the same fuel.

Okay, I have to admit, lately I have been walking or sometimes cycling the 8km round trip to work and back. Selling my car would put R60,000 towards a bond reducing interest and I would not have to pay a rediculous anount on insurance.

Keep in mind, no matter what the financial situation is, people will always need the following in this particular order. If you can supply any of these at any time you will always have an income. Not be rich, but have an income:

1. food and water

2. shelter or a place to stay in

3. clothes

4. transport

One thing that we can not manufacture is land. There is just so much habitable land out there. Get yourself as much of it as you can. In 50 years, if you have the last big yard that was not turned into 4 smaller yards with houses, it will be worth a lot.

I remember stories from my Grandpa, from times of growing up during the war and having his first pair of underwear at age 11 and his first pair of shoes when he went to high school. Having to cycle on them old backpedal cycles in a suit for 30+ km to go visit my Grandma when they were still dating. Life is sooooo much easier nowdays and we have a lot more than we think. We just need to put some away for that rainy day.

[Sa2Nz2Oz]

What do NZ citizens living in Australia qualify for as a pension? Say one has lived and worked in NZ for 5 years and then spends rest of ones life in Aus as a NZ citizen, do they qualify for an Aus or NZ pension some how?

[21yearsoutofrsa]

There is currently a reciprocal arrangement between NZ and Australia with regard to pensions. (and Medicare, and study)

You are subject to the rules of the country of residence though in the case of pensions, so if you live in OZ you will be means tested, even though there is no means testing in NZ.

Post 2001 NZ citizens do not have reciprocal income support (dole) benefits

[Bob]

In Australia, you have to live here for 10 years before being able to claim any Old Age Pension, unless you come from a country which has a two-way (reciprocal) agreement with Australia.

New Zealand and Britain both have lots of reciprocal agreements with Australia for health care and Pensions.

If the Australian gov't requires newcomers to put at least 10 years into the system before they become entitled to an Old Age Pension for the rest of their lives, then I'd check up to see how much residence in New Zealand or Britain is needed to qualify.

If Australians get at least A$27 000 a year for a couple + all the other benefits in life, such as free health care and bus / rail travel, then you only need a few thousand $$$$ in Superannuation to obtain a good living.

Superannuation is not taxed after you turn 60, so my income is tax-free nowadays.

In order to obtain $40 000 a year, you'd need an income stream of an extra $15 000 a year, since you'd lose about $2 000 or so off your pension for having an income stream as large.

So . . . . $27 000 - $2 000 = $25 000 + $15 000 tax free = $40 000.

The main thing is that you have no debts by the time you retire. The family house should be all paid off.

Quite frankly, if a working man can't pay for the roof over his head in his working life of 40 to 50 years, then something is radically wrong. Either he's made some bad financial decisions or a catastrophe had occurred in his life, usually the former.

It doesn't take much to get an extra income stream of $15 000 to $20 000 a year. Looking at share dividends of around 4 to 5%, you could have a share portfolio of around $300 000 to $500 000 invested by the time you retire. . . . . the price of an investment property in Australia nowadays.

[Bronwyn&Co]

But the problem is that people with an employee mentality, tend to want to live in a top neighbourhood, drive nice car, go for nice holidays, wear latest brand clothing and waste their money instead of saying, hey here a great challenge, what am I going to do about this, let start a business or make investments, they too scared of the unknown and that is why most people end up with nothing in the end, worry about stuff they can’t do anything about.

A famous quote that I read once and sit with me, either you mind somebody else business or other fools mind your business.

Money like a flock of birds, if you try to catch the birds, they fly away, if you sit patiently the birds will come to you.

Ain't that the truth. While your example may be a bit ambitious, I agree with everything you have said. It works. I have friends who are just too nervous to take a chance on investments and they have to live from week to week. I know it can backfire badly, but I often joke that I'm a gambler.

"Go large or go home"

@Jacques-with that strategy & discipline, you are going to be laughing in retirement, mate!

Edited June 27, 2012 by Bronwyn&Co

[Bronwyn&Co]

In Australia, you have to live here for 10 years

In order to obtain $40 000 a year, you'd need an income stream of an extra $15 000 a year, since you'd lose about $2 000 or so off your pension for having an income stream as large.

So . . . . $27 000 - $2 000 = $25 000 + $15 000 tax free = $40 000.

in his life, usually the former.

It doesn't take much to get an extra income stream of $15 000 to $20 000 a year. Looking at share dividends of around 4 to 5%, you could have a share portfolio of around $300 000 to $500 000 invested by the time you retire. . . . . the price of an investment property in Australia nowadays.

Hi Bob - It is going to be very very difficult for most of us to gather a share portfolio of $300-$500K and a paid off house in around 15-20 years. 20 years is only 1040 weeks. To accumulate, say, $400k for a modest house plus say $400k in Super is $800k and that would require a saving of $770 a week from week 1(I haven't taken compound interest into account tho) And that's not taking into account interest on the house's mortgage (capital only!). I don't believe super or shares will help me much in my retirement (it's too late and the share market is too shaky), so while my employer & I contribute to my fund, I don't see that helping much. I am used to property and while the Australian ppty market is still in an overpriced bubble, I think my only option is to stick with an investment property and get the tenants to help pay off my asset.

Your calculation of needing an additional $15k a year is do-able at $290 a week, roughly the income one can expect on a modest 3 bedroom investment ppty after maintenance, allowing for vacancies and management fees.

It's our best bet, imho, however any investor should try & balance their assets between shares, ppty & cash.

Ps. My figures are basic & probably contain errors, but you get the idea.

Edited June 27, 2012 by Bronwyn&Co

[Bob]

I hear some oldies saying that owning an investment property requires you to be on hand to some extent, with all the problems and worries associated with it. Correct me if I'm wrong.

That's why I threw in the suggestion that you could make the investment in property and switch to blue chip dividend bearing shares which attract no income tax if an Australian company having already paid Australian tax on its company's earnings.

You can soak up the sun on the beach in Broome for six months without concerning yourselves about vandalism or repairs needed to be done on property.