Ideas... not advice

[lindsayf]

I am looking for some ideas on how to approach finances to position myself and wife for retirement. Nothing anyone says will be construed as financial advice...I am just finding that accountants and financial advisers are limited and conservative in their offerings...at least the ones I come across.

So the gist is this:

Me 55, wife 48..both working part time and this can be the case for the next at least 5 years. Combined income about 100k. No remaining dependents. Good at frugality.

Super: about 100k each, both in industry funds. (Yes there are good but unfortunate reasons for such low super balances).

Realestate: PPR value(25 acres) value about 750k equity about 400k
Investment property1: value about 300k equity about 250k
Investment property2: value about 400k equity about 340k
Both IPs rented and cash flow positive with net income roughly offsetting loan on PPR
Cash available via redraw about 200k.

All properties in regional NE Vic with moderate prospects for capital gain.

Inherited bluechip shares: face value about 110k but no point selling due to CGT.
Dividend income about 5k pa

Trading plan: I plan to scale up my trading as I move more into semi retirement. I can do this both in my super and out of super. I will be trading ASX shares on weekly timeframe, Forex on weekly timeframe and futures intraday, probably Bund. I have not decided on capital allocation but the majority will be with the weekly systems, unless my intraday performance improves.

Again, NOTHING anyone puts in this thread will be taken as advice... I am not so naive as to implement anything I have not thoroughly looked into myself. I am just after some general ideas to think about and if of interest then look into more deeply in a way very specific to the details of our circumstances. I am happy to be a bit aggressive in approach.

Many thanks in advance...

 

[willy1111]

I would be thinking what is the most tax effective way to structure my affairs...what the pro's and cons of those structures.

I would be thinking a weekly system on asx might produce 20% p.a. compounded profits, the general public think this is impossible.

A weekly system requires minimal input and allows one to get on with other activities in life/retirement.

I would be thinking do I want to keep existing IPs for diversification or would I rather no maintenance/headaches and sell down at opportune times, to minimise CGT and deploy those funds to trading systems producing 20% returns.

I would be thinking Superannuation is currently taxed btw 10-15% and 0% upto 1.6m per member in pension phase. Having an smsf would allow me to trade more freely, if I was happy to not need the money until preservation age and not concerned about future changes the govt may make, I would be considering how to get as much as possible into super as it has the best tax outcome.

 

[kahuna1]

Hmmm ,....
Well ... being a trader in many ways all my adult life, an observation is that less than 1% who try, succeed.

Having at various times been king of the world in terms of trading and investments, with hundreds of staff even able to choose between thousands of applications, I repeat the first line again.

Assets wise, not a bad plan if one can pick up a few percent on your real estate assets.
I would point out that 100k in super is not enough, I suspect divorce one of the likely reasons or working for yourself and not paying it.

If I look at net numbers, 1,2 million including super plus 100k in shares CGT is ... what it is ... 25% in reality. Getting the 5% income is ok ...

One needs a place to live and that makes the real number 800 k plus 200k in super.
So a million .... at 5% ... 50k a year income wise and hopefully it keeps pace with inflation.

Of course, one would I believe need to reduce the capital and plan for there not to be much left at say age 90.

If we said say 70k and slowly eating into the capital ... at 20k a year, well ... it would run out !!
Basically 60k ,,,, 50k income and 10k capital .... it could be done, but would be better if the amount was double.

Looking at shares for long term capital appreciation is a good idea historically, an AWFUL one right now. AWFUL.

Long term perspective is needed and investing at ALL TIME highs in equities is never wise.

Whilst I suspect they continue higher for a while, mainly driven by ultra low interest rates, USA market where no one pays any tax, and ignores the deficit and implications, for NOW maybe a another 5-10% more.

WAIT ... is all I would say, and it may be painful, but wait till the world is ending and IT WILL OCCUR, a stock market pullback .... and it does time and time and time again, we will, at some stage have a correction and likely a deep one and BUY when the world ends. In the meantime, it likely will be watching the stock side go up to say 8,000 in the ASX 200 ... or the S+P 500 up to say 3,175 or so. Then ... well .. these things change and whilst not wanting to miss the boat, the boat sailed late last year at 5,400 on the ASX 200 not the 6.780 or so where we are now.

I am not sure how long you plan to work, but ... whilst property seems to be the flavor of the Australian market, it is somewhat overvalued on a longer term basis even after the recent small correction.

I would NOT trade ,,, nor risk capital ... I would be a diversified portfolio of shares. I prefer ones which pay income and holding over 15 or so BLUE CHIP stocks with less than 10% in risky side shares is the go. Any single share keep it under 5-6% overall so you will end up with 20 or so ...

KNOW what they are worth ... or what they are supposedly worth and ONLY buy when they are well below the estimate say 85% or so .... and then expect on the other side they will overshoot the value by similar margins as we are seeing right now.

Get a few brokers reports .... follow the best performing funds and their holdings and mimic them ...
DON'T increase if it keeps going down.
DON'T ... buy if their is bad news out ...
DON'T TRUST anyone ...

I could go on ... but this is your and your wife's next 50 years of income so RISK aversion and diversify the income MORE ... the NET value you have in one investment property at 5% for a decent selection of dividend paying BLUE chip stocks a lot better I suspect than where the MAYBE of being too highly into property may be the go. I don't know where your properties are or ... what they may potentially have ... but 5% on 400k and buying intelligently ... when everyone else is panicking ... slowly ... using your brain ... so you both get income and capital growth works. With a 400k NOT in property at 5% ... whilst your still working .... 20k a year ... PLUS if you learn and read a few books and a lot of brokers reports .... your capital shoudl appreciate ... IF YOU BUY WISELY and are patient well over the inflation rate.

DON'T EXPECT massive returns ... over time ... sure everyone is a hero today with the ASX 200 up 20% plus post Dec 2018 ... it is HOWEVER the SAME level it was in late 2007 !!

That said ... dividends and wise reductions of risk ... inside a super fund I think maybe a good idea. Less tax ... or when your over age 67 ... tax free ... thats the only reason to speak to an accountant.

It does of course go against the grain ... buying when most retail people are selling ... that is the sad reality of markets. People are in love with stocks when they should be reducing and buying when a lot are panicking and selling.

NO LEVERAGE ... on stocks or sparingly ...

Even ... as a suggestion ... have your investment properties ALWAYS for sale ... at idiotic prices or ones that make it very attractive. To avoid cap gains ... maybe sell your house and then move into an investment one and avoid it totally !!

Advice and opinions ... especially free ones to be ignored. SO ignore me ... and especially a bloody accountant or anyone who tells you they can predict the future. Some shares, you will loose on ... no matter how good you are. If its going pear shaped or bad bad news comes OUT ... CUT it ... loosing 50% even on 5% .... of shares ... is far better than 100% . If bad news comes out ... its usually the start ... not the end. Conversely ... into boom times and idiotic rises ... reduce .

Enuf ... from me. Good luck

 

[willy1111]

I would also consider that interest on my home loan is not tax deductible but if I pay it down, split off an amount and redraw it for incoming producing purposes it becomes deductible.

 

[willy1111]

I would also consider that I can put upto $25k per year into Super (depending on balance and including employer contributions) and it be a tax deduction in my name but taxed at 15% when going into the fund, so only worthwhile to reduce personal taxable income tax rate above that.

 

[willoneau]

Hi lindsayf,
thankyou for your back story, as kahuna1 went into great depth about what to do with what you already have there is nothing i can really say and would probably be out of my depth. But i am at a similar age even if not in quite the same position and often think what i am trying to achieve as i also approach retirement.
My question to you is what do you want to do?
do you now trade shares, FX and futures ? and are you consistently profitable.

 

[willoneau]

I would also consider that interest on my home loan is not tax deductible but if I pay it down, split off an amount and redraw it for incoming producing purposes it becomes deductible.

would you pay off your house mortgage with interest rates as low as they are at the moment?

 

[Smurf1976]

would you pay off your house mortgage with interest rates as low as they are at the moment?

I would personally never choose to have my PPOR mortgaged other than due to necessity.

Just my preference.

 

[willoneau]

Hi Smurf1976, I wasn't talking about getting a mortage, i was referring to paying it off at 5% or investing the same at a higher rate at this time? a question i put out there as it was something i have pondered myself.

 

[willy1111]

would you pay off your house mortgage with interest rates as low as they are at the moment?

Perhaps do a google search on debt recycling.

If one has a home mortgage of $200k = not deductible.

And if one has cash of $200k...and wants to invest/trade the $200k in the market (if investing it must be expected to produce income, buying a mining exploration company that has never paid a dividend will not cut it).

Does one

a) put the $200k cash in the market and keep the $200k non deductible home loan or

b) use the cash to payoff the non deductible home loan, redraw the $200k back out into their investment account (do not mix with other personal funds) and invest/trade the $200k.

The result is the same however in scenario b the interest is likely to be deductible... there may also be other consequences to consider so best to seek personal tax advice.

Something to explore.

 

[willoneau]

Perhaps do a google search on debt recycling.

If one has a home mortgage of $200k = not deductible.

And if one has cash of $200k...and wants to invest/trade the $200k in the market (if investing it must be expected to produce income, buying a mining exploration company that has never paid a dividend will not cut it).

Does one

a) put the $200k cash in the market and keep the $200k non deductible home loan or

b) use the cash to payoff the non deductible home loan, redraw the $200k back out into their investment account (do not mix with other personal funds) and invest/trade the $200k.

The result is the same however in scenario b the interest is likely to be deductible... there may also be other consequences to consider so best to seek personal tax advice.

Something to explore.

doesn't work that was in aussie

 

[willoneau]

IF you have collateral in your home you can get investment loan against it which you can claim the interest at tax time against any income producing investment.
Sorry just re - read it and agree, but what if you don't have that 200000 up front to pay out mortage?

 

[willoneau]

willy1111 , getting a little side tracked from what the original question was asked i think.
Re- read it and tell me what you think?

 

[willoneau]

Out of everything he said this is what caught my eye,

Trading plan: I plan to scale up my trading as I move more into semi retirement. I can do this both in my super and out of super. I will be trading ASX shares on weekly timeframe, Forex on weekly timeframe and futures intraday, probably Bund. I have not decided on capital allocation but the majority will be with the weekly systems, unless my intraday performance improves

 

[Value Collector]

I am looking for some ideas on how to approach finances to position myself and wife for retirement. Nothing anyone says will be construed as financial advice...I am just finding that accountants and financial advisers are limited and conservative in their offerings...at least the ones I come across.

So the gist is this:

Me 55, wife 48..both working part time and this can be the case for the next at least 5 years. Combined income about 100k. No remaining dependents. Good at frugality.

Super: about 100k each, both in industry funds. (Yes there are good but unfortunate reasons for such low super balances).

Realestate: PPR value(25 acres) value about 750k equity about 400k
Investment property1: value about 300k equity about 250k
Investment property2: value about 400k equity about 340k
Both IPs rented and cash flow positive with net income roughly offsetting loan on PPR
Cash available via redraw about 200k.

All properties in regional NE Vic with moderate prospects for capital gain.

Inherited bluechip shares: face value about 110k but no point selling due to CGT.
Dividend income about 5k pa

Trading plan: I plan to scale up my trading as I move more into semi retirement. I can do this both in my super and out of super. I will be trading ASX shares on weekly timeframe, Forex on weekly timeframe and futures intraday, probably Bund. I have not decided on capital allocation but the majority will be with the weekly systems, unless my intraday performance improves.

Again, NOTHING anyone puts in this thread will be taken as advice... I am not so naive as to implement anything I have not thoroughly looked into myself. I am just after some general ideas to think about and if of interest then look into more deeply in a way very specific to the details of our circumstances. I am happy to be a bit aggressive in approach.

Many thanks in advance...

If I were put in your situation, (as the topic says this is an idea, not advice)

I would do the following.

1, Put all tax deductible debt on interest only (investment debt)

2, Then redraw the $200K, at probably around 4% interest, and invest it in rate setter at 8% (generating extra cashflow)

3, Make sure the share investments are actually in good companies, and if so just collect the divvies.

4, Use all the available cashflow from Shares, Property, Rate setter and wage to clear debt and make any tax advantaged contributions to your super.


-------

The goal being that at retirement you have paid off the Home, built up a decent super account and started clearing debt on investment property, and you have a cash flow positive rate setter investment.

 

[willoneau]

Ok my turn ,
1) equity in land 400,000 good start.
2) 2x investment properties pos gearded (great), question has the building depreciation claim expired (usually 10 years) if so revert to principle / interest loans as they are lower than investment loans by quite a bit since banks tightened up ( might be different now?). Can be left to pay them selves down with out much thinking about. Also good return in times of bear market cycles once debt free income producing.
3)Blue chip shares worth $110,000 income return 4.5% before tax and any franking. So with land equity and interest around 5% why bother touching them.
That is how it looks to me, now the fun side trading?
Big question is are you a consistently profitable trader at this time? if yes use equity in land up to a figure you can sleep at night and start getting a return higher than the interest payable on that investment loan which is tax deductable when running a trading business.
If not then leave it were it is and start the journey down the road to consistence. Being here is a good place to start.
just my two cents worth.

 

[Smurf1976]

Hi Smurf1976, I wasn't talking about getting a mortage, i was referring to paying it off at 5% or investing the same at a higher rate at this time? a question i put out there as it was something i have pondered myself.

My rationale is as follows:

1. I would personally not be prepared to put my home at risk in order to increase investment in an unproven or low return investment strategy.

2. If someone has a proven investment strategy producing decent returns and has done so for long enough to have confidence that it's well and truly proven then the value of their home is likely to be a relatively small portion of their total assets anyway.

Others will have a different view but that's mine and it comes down to risk and what's most important. Being able to retire or buy fancy cars is nice but having a roof over my head is more critical.

 

[qldfrog]

52yold just retired
Safety first:
Only play with what you can afford to lose
So keep your title to your house your own, not with a bank
Worst case scenario your bank collapses: where is your title? Can you release it? No or at what cost if that bank is in bankruptcy?
So my point is, as smurf pointed
Make your home as safe as possible

Super investment:
Would i be retired if i had invested as pressed by advisers in my super?
Nope
See super as a ponzi scam looks great on paper, some make good money and can actually cash in
But what is important is: can you access it? What are the risks that you may not be able to?
Rules have changed basically yearly and i would not be surprised to learn access being pushed 2or 3y then maybe more later
And be wary of expected returns on trading
Most lose, and stock market can be pathetic ask japan
Or even waiting 12y to break even as we just did
When population growth stops and ages, real returns slow down.
Immigration can help but not if you just import welfare and social nightmare: ask europe
So my only recommendation, not advice is you are not in a bad situation, do not worry too much with super, increase your overseas exposure currency, countries.
Maybe india, se asia for share markets?
And usd yen gold for currencies.
No point doing good in Australia if the australian dollar collapses
A point rarely discussed here

 

[Smurf1976]

There's also a big psychological aspect to trading or investing and having important personal assets, particularly the house, at risk is going to upset that for some people certainly.

 

[kahuna1]

Just to add ...

Tax wise .... silly to have the loan on your house .... NOT on the investment properties.
One is tax deductible ... the other is NOT.

Lots of tax issues as to selling the investment properties ... but... unless they are too far ahead in cap gains, I suspect by VERY PRUDENT .... Very conservative investing .... NOT BLOODY TRADING .... that's a different animal ... you could get 5% INCOME and identical if not better capital gains over time via shares putting you say 5% INCOME ahead on say 400k you extract from selling ONE of the investment properties.

Debt wise .... get the loans all on the investment property .... RUN it as a loss ... basically a 100% of equity loan and put the NEW NO debt on the home you live in up as security. Having an identical sized loan ... but having an extra 20k or so tax deduction will put 10k in your hand each year.

Same on salary sacrifice ... or similar ... putting it into a super fund and paying 15% tax is far better than close to 50% ... again ... its a long term or short term saving plan.

Try and NOT incur cap gains tax if you can .... selling your own house you miss that .... move into an investment one for a year or so ... you miss it I think ... again issues.

As for the REST ... DON'T trade ... trading is a game where VERY few win ... few have the skills or temperament or discipline, Sure it looks easy in a bull market or a few years of 15-25% gains where even rubbish goes up. As I mentioned on another thread, some people boasting about this years returns .... which yes, has been kind, but if you were able to get 20% returns after tax ... for a mere 15 years on 400k .... well you would have 15 times your money at the end.

Part of this .... a lot of retirement planning IS about tax ... and avoiding it ... the rest is about prudent INVESTING... NOT trading or speculating but taking conscious deliberate well researched LOW risk ... higher return decisions to ENHANCE ... your retirement income.

TRADING .... will not and does NOT do that unless your a freak and someone who is an exception ... the one in 1,000 candidates we hire .... of them one or two out of 100 are that .... SHORT term and then they usually burn out at 10 years of high pressure trading and that leaves 1-2 ... so less than one in a million !!

Whilst on paper ... your assets look great and MUCH better than most I got handed when asked similar questions .... sadly no one thinks about retirement or income or where the money is coming from till they get to say your age of 55 and have a mere 50k in their retirement assets and say pwn their own home and ASK .... how can I fix that ?
\
Between you and your I am sure lovely wife, Your position is a lot better ... it does need RADICAL work. Maybe your investment properties DO have great capital gains potential ... MAYBE they do ... but if they don't and you can exit with no or little tax ... DO IT. Put all the loans on the single one you have left.

Whilst ... having I think missed the boat on shares with a longer term perspective .... buying at 5,500 in the ASX 200 v 6,800 .... a mere 6 months latter speaks for itself ... ONLY idiots can not see the difference. Whilst I think we may go a lot higher ... its ALWAYS a game of timing and wait till there is some scare, and BUY into that dip ... always. The world WILL not and does not end despite it feeling like it.

Maybe you do nothing ... but tax wise ,., you can save yourself 10-20 k a year just by arranging your affairs ... by removing the least favorable investment property ... or selling your home ... taking cap gains and moving into one investment property ... over say 10 years your adding in real terms to your retirement pile a REAL 200 plus k . That's 20% PLUS any cap gains you get ...

Freeing up cash and hopefully the shares ... good ones keep pace and beat inflation ... by a decent margin ... and you just reinvest the 20k income at 5% on 400k freed up ... another 20k ... each year ...
your adding another 200k .... or 20% More to your nest egg ... over time.

Add the two together .... and compounding it with INCOME on the side ... and 400k becomes DOUBLE that so about 80% MORE in the retirement nest egg.

It is NOT about magic .... let me be blunt ... most idiots THINK its easy or boast about returns, most however would not know returns if it bit them in the arse. If they did and only starting at say 100k and making 20% after tax over 30 years, well one would be 237 TIMES more well off .... or 23.7 Million.

Most outside of extreme bull markets cant make money and DON'T make money trading. Eventually they put too much risk in one share and SPLAT .... they are gone ... all their assets are gone and well ... its sad. Go to the TAB .... or local betting shop on a Saturday and as an exercise .... have a drink or two, a flutter or two. small but watch, find the most desperate and clearly thinking the can win person and take TIPS from them, WITH THE REST of your life and that is what trading and hot tips and charting and some idiotic ideas you will find likely parroted by most accountants an investment advisors and certainly MOST traders.

There are old traders and there are bold traders, but there is NO such thing as an OLD BOLD TRADER. Reason being, is that they blow themselves up. EGO ... is needed to be a trader, being bold, but the good ones and they are rare ... may be bold ... may appear brash or dismissive and they have to be, reality is most think .... think they know about market or trading but most are in fact like the idiots at the TAB who are desperate to WIN and back the horse ... have more hope of success at lotto than they do at trading.

Sorry harsh .... but ... I am well qualified and have shared on various sites now for over 25 years trying to at times hoes down idiotic tenancies of people for the latest fads and conversely get them to BUY quality on market selloffs.

Human nature and futility .... usually I speak to myself on some threads of decent stocks when I used to bother. Ones that are 40-60 times where they were 10 years ago ... NOT penny dreadful s ... but decent companies.

BE an investor .... NOT a trader.
Now I sent you to the TAB ... next trip ... LOOK and find some homeless person and SIT and study them, and elderly one ... and ask yourself DO you love your wife ? Do you love yourself ? Have a good look ... a very good look ... and remember less than 1% of traders actually make money over time.

Be an investor, its boring ... and 99% boring and 1% sheer terror as the world appears ending and you BUY ... Not sell like the lemmings .... BUY into a market falling like a stone because whilst the lemmings were all buying at the other end of the world, you were reducing into their madness and going, thanks and reducing risk and taking it off the table.

Sobering ... but a good dose of it is likely a waste of time. I have tried over the years, loving a share when its say at 35 cents, hating it at $8 when the research pays off and its trading as though the next 20 years of what appeared likely would occur. It didn't ... and I still have not entered again. It appeared a sure thing .... but when already paid off for a sure thing, paying CGT ... tax ... on a massive gain ... even at the 50% discount so 25% is a good thing. Doesn't happen often but sometimes rarely ... it does.

Trying to conversely explain to a devoted following of drooling believers on some share that's at its highs is a ponzi scheme and worthless ... and most small shares ARE worthless, likely never paying a dividend is a loosing game and waste of time for the current crop of idiots from the TAB soon to join the ranks of the homeless poor.

Sorry but we, or you are asking about your retirement and if you have say 400k ... I would insist, if I could than no more than 5 % of that went into any venture or company than did not and had not paid a dividend or made a profit. Sure, maybe .... you get a goodie ... and that 5% split into 5 lots of 1% .... if you happened to get a monster and they do occur, MAY go up 10 fold .... and 1% becomes 10% of your portfolio ... more often sadly over time, the balance will not perform as well, they WILL NOT pay you 5% each year in income and hopefully if your very wise and patient make 5-10% above inflation ....

So that 400k or likely 800k you have been compounding via tax arrangements .... if you get 10% above inflation over the next 10 years .... on your 400k in the markets ... you basically DOUBLE your retirement nest egg, DOUBLE your retirement income and well .... don't end up living in a cardboard box.

I sound blunt ... but its a game for mugs ... investing and trading. I will try and sell you something worth $1- but offer it to you for $2- and if you buy it, I will ask if you want another ? up until ... well you have it full invested ... and your really HALVED your assets.

Lots of learning I suspect you need, some decent books ... not stupid ones like rich dad poor dad or some other moron ... ones about valuation and investing, not trading. Read lots of brokers reports on shares, read the best returning fund managers in shares and various classes of shares and what they hold ... and eventually it will sink in.

Sorry but I am blunt at times, once young brash and aggressive ... the highest compliments a young trader can ever have on their assessment, nowadays its a computer that does the trading and follows trends and cuts losses and so on. Whilst it appears exciting the returns, the ASX will not add 20% every year, in fact at some stage it will likely be minus 40% ... and that's time to buy quality. Since your not invested, its a game of getting that 5% income and hopefully 5-10% above inflation over time ... so sitting at 1% in a cash account WILL NOT work and possibly one might have to accept a not so great first entry. BUT you need to be invested, all be NOT here .... NOT at all time highs and yep despite me thinking we go higher over time, you will at some stage when the euphoria and new crop of idiots and drooling TAB punters have spent all their cash on worthless crap, there is always a correction and NEW level to enter the market.


Anyhow, likely I have insulted many who are reading this, shared some wisdom for those who are honest and those who feel insulted, go look at your returns over time and be HONEST. Most sadly are not

Its an aside, a delusional one ... for most. Horse two race two .... at the TAB.
Good luck