Hi All,
New to posting but have been reading the Mr Moustache articles and reading tons of material on the forum for about a year now.
Both partner and I emigrated to NZ 6 years ago and love it. All my previous investment knowledge have come from property investment as there weren't many options where we were.
Now a little bit about us - We live in a very comfortable home that we purchased at $450k and is now valued at $500k should be ever want to sell it and move to a smaller place. We are 38 and 36 respectively and don't have any human kids, only a furbaby. We are mortgage free and completely debt free. Our household income is slightly more than $150k per annum and our cost of living is around 20% of that which includes a lot of international travel/family holidays as our extended families live abroad.
I recently sold a property investment overseas which has increased our liquid savings to $400k and this is at the moment sitting in a term deposit, earning 3.2% @ 10.5% tax rate. We have about $10k in peer-to-peer lending that is generating returns of 10-12% but the amounts are small.
We have both decided that we would like to retire (i.e. work for money) by the time my partner is 42, (he is younger @ 36) and would like to have a comfortable income of $6000/month to be able to travel, pay for the occasional luxury restaurant, volunteer and donate to worthy causes etc. We both have medical and disability/death insurance coverage. To work out how much we are going to need, my very basic calculations are below:
I am unclear as to how to calculate how much cash we are going to have to raise before ER. I realise that we are able to include in our portfolio income generating assets eg. rental property but I want to be ULTRA conservative and would like to have a significant amount of cash put aside before we call it a day.
Assuming we are only able to generate $1k of income a month through other means like rent and dividends, we will still require an ER income of $60,000 per annum.
Part A: How much do we need?
Based on my very simplified calculations, and assuming we live up to 85 years of age, I have come up with two numbers:
85-42 = 43 years in ER
$60,000 @ 43 years @ 2.7% inflation (average Kiwi inflation in the last 15 years) = $2,649,660.00
$60,000 @ 43 years @ compounding 2.7% inflation = $4,402,622.05
- Which number should I use?
- I realise I haven't taken into consideration interest generated from leaving the money in a term deposit but the trend in that respect seems to be that savings interest rates are declining.
Part B: Generating the cash
1. Through savings - Our income is pretty secure for the next 5 years at least but I have discounted that as well and lowered it to 130k per annum at 20% cost of living per year. Saved household income = 104000 x 5 years = $520,000, which leaves another $2mil to raise if we're going with the first calculation!
2. Through wealth creation strategies such as buying and selling property - this is where I need help. Some financial investment strategies here would be great. We've looked at stocks, managed funds, property investments and peer-to-peer lending and so far find that property investment is still the best way to generate a large amount of returns in a relatively short period, <5 years. We also have some experience buying off-plan developments in blue-chip areas and have in the past sold for a good profit.
Part C: Income generation post ER
1. Rental property - I have been crunching some numbers in the Wellington region where we live and I can't seem to find the numbers to make sense. Most investment property initially comes across as good until you really look at it conservatively then the returns are at best 4-5%. And that is if you manage the properties yourself. Perhaps I am looking in the wrong places? Some property forums have advised to look into areas like Palmy for better rental yields?
2. Any other suggestions/recommendations?
I am a bit of a novice when it comes to investments in NZ and haven't really explored much in other areas. I find stock investments slightly confusing though my partner seems better at it though is very risk averse. We were recently introduced to investing in start-ups both in tech and manufacturing and were interested. However, many of these start-up companies we've met seem to struggle with their Investment Memorandum and can't seem to give us satisfactory explanations or realistic looking projections. Anyone else have experience in this?
Any feedback and suggestions and/or discussion welcomed! Really happy to have found this forum!
Jennie
"It's not how much money you make, it's how much money you save." - my Mother