Can Gordon’s retirement plan deliver lifestyle he wants?

Gordon aims to retire in three years and asks Noel Whittaker to evaluate his plan.

Can Gordon’s retirement plan deliver lifestyle he wants?

Gordon aims to retire in three years and has a plan that he hopes will allow he and his wife   to satisfactorily manage their retirement. He asks personal finance guru Noel Whittaker for his thoughts.

Q. Gordon
I’m 62 and plan to retire at 65. My wife is 59 and will retire in the next 12 months. We have an investment property in a self-managed super fund (SMSF) with about $250,000 debt on it. There is currently about $400,000 equity in the property (it is valued at approximately $600,000 to $650,000). We expect to be able to pay off the debt on the property in the ensuing years (before I retire) with a gifted amount. We currently have about $250,000 in our combined super. We own our family home.

My plan on retirement is to use the rental income of about $500 per week, plus an additional $500 per week from our super fund. We will run down the super fund ‘cash’ until we need to sell the investment property to cash up our super again. We will ultimately have to rely on a pension, but are planning for that to be in our later lives when spending to this level will not be needed. Does this make financial sense?

A. Based on the information supplied, you should be able to access your superannuation when you retire, and when your wife stops work permanently. You should be able to contribute money to your fund to pay off the property debt, because the debt is not great and you would be under the limits for contributions. I guess the big issue is whether the property will continue to give the rent it has been giving. But summing up, what you say seems reasonable.

Do you have a question you’d like Noel to tackle? Email us at newsletters@yourlifechoices.com.au

Noel Whittaker is the author of Making Money Made Simple and numerous other books on personal finance. His advice is general in nature, and readers should seek their own professional advice before making any financial decisions.

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    COMMENTS

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    Paicey58
    29th May 2019
    10:28am
    I suggest they go to a really good financial adviser.
    I don’t see the benefit in running their superannuation down to zero dollars?
    My thought would be to sell the house and leave the money in the smsf you would then have around $900000 in superannuation that could be invested in stocks and shares that should pay them around 8 To 9 percent interest including franking benefits. This should be all tax free with both of them in the smsf. That’s a return of around $70000 to $80000 a year and you still have your $900000 in the super fund!!
    Thats lot better than the $52000 they were looking to make with their current plan and drawing down on their money in the super fund.
    Go and get some good advise.
    Greg
    29th May 2019
    11:40am
    Who is this mythical "good financial adviser" you speak of?
    tams
    29th May 2019
    11:56am
    How often over a 20-30 year period do you get 8-9% return annually????

    Perhaps the other way to look at it is what would be the value of the property in 15 years time - I would guess somewhere around $1.1m+
    tams
    29th May 2019
    11:56am
    How often over a 20-30 year period do you get 8-9% return annually????

    Perhaps the other way to look at it is what would be the value of the property in 15 years time - I would guess somewhere around $1.1m+
    Greg
    29th May 2019
    12:11pm
    tams - exactly with the returns comment, you can't just assume you'll get 9% next year, the year after, and year after year.

    Property, yes most likely would increase substantially but also costs to maintain and, depending on location, may not increase so much.

    There's always some luck (or bad luck) in investments.
    Paicey58
    29th May 2019
    2:09pm
    Most of the large banks give you 6.5% dividend return on you money and then a 3% franking return at the end of the financial year.
    So yes you can get between 8 to 9% return for your money with shares in the banking sector. West farmers share returns are another good investment.
    I’m not talking about the tiny returns you get from leaving your money in a fix or term account at 3% don’t even bother I’m talking about dividend returns from investing in blue chip shares. Sure you will get some ups and downs but overall it’s pretty steady in the long run.
    Property was a good investment but not at the moment and your money is all tied up and not accessible until you sell.
    Ted Wards
    29th May 2019
    11:36am
    I still find it amazing that finance is the only aspect of retirement that people look at. SO you have what another 30 years of life ahead of you? Just exactly how do you plan to spend that time? Yes it's very important to get the finances correct, but that's just one aspect of retirement, that's a lot of your life that you can waste by drifting through the time. Plan your time as well. After travel and the grandkids, what comes next? Believe me, I deal daily with retirees who did not give a thought to how they were going to spend their time in retirement. The thought of doing nothing for a week or s might be fine...but 30 years or more?
    Lorrainehk
    29th May 2019
    12:01pm
    After travel and grandchildren, we did not plan our retirement. When my husband and I retired in 2014 we could not have imagined what the next 5 or 10 or 30 years would hold. The last 5 years have been very exciting with all types of opportunities coming both our ways. We have not drifted but grabbed the opportunity of the freedom to do what we want without restrictions. We have been able to use the skills gained from 40 years of working to put back into communities, both in Australia and overseas. We travel with purpose. Why plan too much?- You cannot imagine what is out there. Be open to all opportunities. Get out there- only boring people are bored in retirement
    Anonymous
    29th May 2019
    4:53pm
    I agree Ted Wards, we do volunteer work and are active with our Probus club. Our children laugh when they see our calendar with a lot of the days filled in. We also fit in some travel which we both enjoy while we are able to do it comfortably.
    Chris B T
    30th May 2019
    8:38am
    Plans work well, unknown changes years out or on a whim from Government are The Devil To your well Placed Plans. To meet these New Requirements cause unnecessary Tress, Problematic Corrections.
    Financial Advisers are a kin To Crystal Ball Gazers, who knows what the Government are Planing when they Themselves Don't Know what Changes They are Going To Make Year in Year Out.
    Every comment From Financial Adviser's/Fund Managers is Past Performances is not a Indication For Future Performances.
    The Decision To Take There Advice Is Your Responsibility.
    Those 2 Comments alone indicate they Don't Have Much Faith In There OWN Advice.