Retirement Stocks 2019

[Zaxon]

Thanks all, So excluding super/SMSF's is there a good tax effective way or stock/index instrument to accumulate money/wealth via regular contributions and/or dividends(DRP's) that would compound over time?

Buy-and-hold capital growth can be super tax efficient. If you put money into shares and don't sell them, particularly ones that pay little or no dividends, none of it is taxable so far. Then when you retire, you can sell down an amount where the income places you below the tax free threshold. For a retiree, that threshold is dramatically higher than for a younger person.

In theory, you could pay zero tax on money you've been investing over your whole life.

 

[Value Hunter]

Value Collector at what age did you actually retire?

I think not enough people noticed one of the most crucial factors in your success. Having a good and supportive wife. If you had a wife who wasn't on board with your savings program or if you had a wife that divorced you it would be a very different story. I have met some men that have been divorced twice and they were all broke.

 

[qldfrog]

VH,
You have a point:
A divorce is a certain wealth destroyer and wife and i worked as a team
Her regular income allowed me to take risk into contracting then own business
Without that, i would still be an 8 to 5 slave
Very good point

 

[SirRumpole]

Children are certainly wealth destroyers.

 

[sptrawler]

The other point that has a huge bearing on retirement, is what someone expects from it, in my case my wife and I love travelling therefore that requires a certain amount of income.
On the other hand a really good friend of mine, isn't interested in travelling and just loves photography, reading and music so the amount he requires is far less.
In reality, there are a lot of costs associated with working and after 8 years I'm quite surprised how much less you actually spend when retired, as opposed to when working.
Just my opinion

 

[Muschu]

Hi
Zaxon - I think I mentioned earlier than we're about 30% in cash and the rest is largely in LICs.

There seems to be some interest here in "retiring young"... Is this an ambition for many? I am curious, if so, as to why.... Genuine question.

We have a son, aged 50, who has done well enough financially to "retire" but his intention is to find a position, next year, in the non-profit sector in order to give back. He already does this voluntarily but out of hours at the moment.

I also have a close acquaintance of enormous wealth. Yes, his money has made more money. But there never seems to be enough and giving some money to those in need is an exercise taken on in a very business-like manner. I don't think he finds it "joyful".

We're comfortable and I'm happy with that. 51 years of marriage; own our home and can attend to most needs.

I get the impression that there are some very generous and successful younger people on this thread. I do wonder what some of you do with your time. I'm certainly not critical, just curious.

 

[sptrawler]

In the early years we lived super cheap, still had heaps of fun (the best things in life are free) but we saved heavily, no over seas holidays till I was 32 (except for and reunion and funeral in NZ), No new cars till I recently got the Tesla, No big houses etc etc.

VC you obviously still operate on a fairly lean budget, if your first new car was the Tesla and you don't have a big house. So your actual operating costs, I assume are far less than your earnings.
Will you add to your property portfolio, or build on equities.

 

[aus_trader]

Buy-and-hold capital growth can be super tax efficient. If you put money into shares and don't sell them, particularly ones that pay little or no dividends, none of it is taxable so far. Then when you retire, you can sell down an amount where the income places you below the tax free threshold. For a retiree, that threshold is dramatically higher than for a younger person.

In theory, you could pay zero tax on money you've been investing over your whole life.

That could be an idea Zaxon, I didn't look at the whole picture from a retired point of view as I am not retired yet. Could the retired members reading this confirm Zaxon's findings that you are eligible to a larger than the 18k tax free threshold when you are retired ? If so by how much (roughly) or does it come in the form of other concessions ?

I have been doing medium term trading etc for trying to increase what I make, but reading all this information motivates me to also build up a portfolio of stocks and ETF's/LIC's that generate income and possibly capital gains and hold them over the years till retirement. Hopefully then the dividend/distribution income from those or CGT from selling down those holdings won't be taxed as heavily as currently.

 

[aus_trader]

There seems to be some interest here in "retiring young"... Is this an ambition for many? I am curious, if so, as to why.... Genuine question.

Yes, I would like to be in a position to retire before the actual pension eligibility age which seems to be getting longer by the Government policy changes over the years. Would be happy to work part-time or on a casual basis if financially in a position to completely retire. I would probably get bored otherwise as I am not into fishing or golf.

If there was no requirement to earn money to live comfortably i.e. If what I have in cash and investments made a good annual income I'd also be quite happy to donate my time to charitable causes and to the community on a voluntary basis.

 

[Zaxon]

That could be an idea Zaxon, I didn't look at the whole picture from a retired point of view as I am not retired yet. Could the retired members reading this confirm Zaxon's findings that you are eligible to a larger than the 18k tax free threshold when you are retired ? If so by how much (roughly) or does it come in the form of other concessions ?

Oh, if you wait for real retirees to answer you, they'll need to have their cup of Earl Grey, put in their false teeth, have all their pills labelled Tuesday, and have a potter in the garden before they'll get back to you.

See https://www.superguide.com.au/smsfs/no-tax-retirement-sapto

Firstly, what it's called:



And here's a table listing the offset:


It goes on, but you get the idea.

 

[qldfrog]

Oh, if you wait for real retirees to answer you, they'll need to have their cup of Earl Grey, put in their false teeth, have all their pills labelled Tuesday, and have a potter in the garden before they'll get back to you.

See https://www.superguide.com.au/smsfs/no-tax-retirement-sapto

Firstly, what it's called:

View attachment 98109

And here's a table listing the offset:

View attachment 98110
It goes on, but you get the idea.

As far as i know, it only applies to real retired people, past the age threshold, but would be very happy to be wrong, so in your 50s or earlier no such things
As a couple, we can live happily on around 60k a year so we only need to take 30k income each, obviously a bit more with dividends reinvested etc but income remains low so not much tax
Also seriously considering OS move part time to not remain australian resident for tax purpose
Quite complex and as far as i can see require a move to flexible assets so in a process to reduce real estate part of portfolio
We are a bit off the track in this thread as it turns into a more retirement focus than its title implies

 

[Zaxon]

As far as i know, it only applies to real retired people, past the age threshold, but would be very happy to be wrong, so in your 50s or earlier no such things

Correct. As the name implies, it's available for seniors:


If you retired early, the good news is you'll be a senior eventually

 

[Value Collector]

Thanks VC …… Using Options to create value was probably the main thing that got me interested in the Stock market before I joined ASF …

Unfortunately Commsec assessed I did not qualify for an "Options account" back then, so I started trading speculative stocks instead …..

That cost me a couple of shirts back then (it could have easily cost me my marriage given the extent of the losses) but I stuck at it and now days have recovered to the point of "going ok" … go me! lol.

The obvious next question is .... What was your criteria for choosing Capillano and Fortescue at the time you did? (ie. how did you assess the future value of those companies to give you the confidence to go in hard? … ie Fundamental analysis/buy when a Stock is undervalued?)

If I may also ask …. How much do you now consider (in hindsight) was "luck" a factor in your "wins?"

That is certainly not meant to be a derogatory question in any way … rather a personal observation over the years, that getting outlier results on the S/market can sometimes be a bit random.

Bottom line, you have been very successful …… and any "hints" for the rest of us will be graciously absorbed

Cheers.

If you read through the Capilano thread I go into detail of why I chose it, same with the Fmg thread.

Luck has played a part in my success, but it surely isn’t all luck.

Buying into property as a 19 year old first year soldier right before the boom was dumb luck,

Although if you read this little plan I hand wrote when I was 14, you can see I was just working the plan.

I never bought the donut king, but I did buy another business.

 

[Value Collector]

Value Collector at what age did you actually retire?

I think not enough people noticed one of the most crucial factors in your success. Having a good and supportive wife. If you had a wife who wasn't on board with your savings program or if you had a wife that divorced you it would be a very different story. I have met some men that have been divorced twice and they were all broke.

Yes, having a partner that is onboard with your plan is crucial, And that has probably been the luckiest part.

My wife gave up work first, about 5 years ago, and I sold my business about 13 months ago, however I wasn’t actually drawing a wage from the business, 100% of the businesses profits were being used to buy investments in my wife’s name to build her accounts up.

So I have been living off my investment portfolio using the 50% ratio I talked about for over 5 years or so, we actually lived in a small apartment on the business premises so no rent to pay, so it was super easy.

In hindsight I should have got rid of the business earlier, but I was a bit scared to make the leap, and not having to pay rent was a bonus.

 

[Value Collector]

VC you obviously still operate on a fairly lean budget, if your first new car was the Tesla and you don't have a big house. So your actual operating costs, I assume are far less than your earnings.
Will you add to your property portfolio, or build on equities.

Yeah My day to day life is pretty cheap, although since leaving full time work I have been spending a bit on travel, splashed out on the Tesla (but I had time to save up for that due to the long wait), and have been eating out more.

So I am spending more than ever, but still not overly much, I have set a budget of $117,500 (50% of this years cashflow) for next year, but I probably won’t use all that.

 

[qldfrog]

VC, that scan of your plan as a kid is gold
Schools should have it as part of their curriculum
Obviously, the government would not like it....
Kudos
We will agree to disagree on Capilano but investment wise, well done
Do you have kids and did you manage to share that spirit?
Ok out of topic

 

[Value Collector]

VC, that scan of your plan as a kid is gold
Schools should have it as part of their curriculum
Obviously, the government would not like it....
Kudos
We will agree to disagree on Capilano but investment wise, well done
Do you have kids and did you manage to share that spirit?
Ok out of topic

No kids yet.

 

[Bill M]

You are an amazing person Value collector. I am not so different to you and I retired early too. I got a hand written note too but at a much later stage of my life, back in the early 90's. I never won lotto, got a free handout or got an inheritance. Always worked simple jobs, mostly unskilled but I work every scrap of O/T while all my mates were drinking beer in the pub. They use to call me dollar Bill because I even went in for 4 hours O/T. Saved my money, bought a small business that doubled 3 years later and I sold it. Cashed in and bought a 1 br apartment in Sydney and gave myself an overseas trip. Since then I have bought and sold 11 properties mostly in Sydney.

If I had to I could go back to work and make more money and more investments but I do not have to and I live a very simple life. I believe that when you have enough, then stop and let others have a go. Seen too many of my mates die early and never enjoy life. I spend nearly 6 Months a year travelling.

These days I find people don't really want to take on any risk, not even younger ones. I mean for example people are happy to get 1.9% in an online savings and complain about the low interest rate. But mention high dividend yield shares or RateSetter and they won't do it. I did not mind risk when I was a young fella and at one stage even bought a apartment off the plan in a top notch suburb of Sydney. The business I bought also had risk involved. These days people just won't take on any risk even if there is a chance of making substantial gains.

Now, I still owns stocks and invest in RateSetter, the rental apartments are all gone. The stocks are long term holdings in my super. A very simple investment in the Vanguard ETF, VHY pays me around 6% income. I really could not care if the share market took a 50% dive, I am expecting it at some stage. But I am prepared for it because I have set aside a cash fund for injection into the sharemarket should this happen. You need to be ready for any eventuality. I am a strong believer of no risk = no reward. Good luck everyone.

Edit: I just noticed your no kids comment, same here too.

 

[Value Collector]

You are an amazing person Value collector. I am not so different to you and I retired early too. I got a hand written note too but at a much later stage of my life, back in the early 90's. I never won lotto, got a free handout or got an inheritance. Always worked simple jobs, mostly unskilled but I work every scrap of O/T while all my mates were drinking beer in the pub. They use to call me dollar Bill because I even went in for 4 hours O/T. Saved my money, bought a small business that doubled 3 years later and I sold it. Cashed in and bought a 1 br apartment in Sydney and gave myself an overseas trip. Since then I have bought and sold 11 properties mostly in Sydney.

If I had to I could go back to work and make more money and more investments but I do not have to and I live a very simple life. I believe that when you have enough, then stop and let others have a go. Seen too many of my mates die early and never enjoy life. I spend nearly 6 Months a year travelling.

These days I find people don't really want to take on any risk, not even younger ones. I mean for example people are happy to get 1.9% in an online savings and complain about the low interest rate. But mention high dividend yield shares or RateSetter and they won't do it. I did not mind risk when I was a young fella and at one stage even bought a apartment off the plan in a top notch suburb of Sydney. The business I bought also had risk involved. These days people just won't take on any risk even if there is a chance of making substantial gains.

Now, I still owns stocks and invest in RateSetter, the rental apartments are all gone. The stocks are long term holdings in my super. A very simple investment in the Vanguard ETF, VHY pays me around 6% income. I really could not care if the share market took a 50% dive, I am expecting it at some stage. But I am prepared for it because I have set aside a cash fund for injection into the sharemarket should this happen. You need to be ready for any eventuality. I am a strong believer of no risk = no reward. Good luck everyone.

You are spot on with your thinking on risk, as investors it’s our job to intelligently put money out into assets where it is at risk, and get paid for doing so.

People complain that Term deposits have zero return after tax and inflation, but ofcourse they don’t, because there is zero risk, the banks shareholders, bond holders and the government are all taking the risk away from you, so they get their returns you get your cash stored free of charge.

Move up the risk profile to a bank bond holders or share holder and you will find your return improving.

 

[Belli]

Could the retired members reading this confirm Zaxon's findings that you are eligible to a larger than the 18k tax free threshold when you are retired ? If so by how much (roughly) or does it come in the form of other concessions ?

Dividend income pa: $36,000 fully franked at 30%
Franking amount: $15,482
Total Taxable Income: $51,428
Tax on Taxable income: $7,981 including Medicare Levey, $228 low income offset and $1,080 Middle and Low Income Offset.

Subtract Franking.

Tax Refund: $7,447.

Also seriously considering OS move part time to not remain australian resident for tax purpose

Just in general. Care to ensure if one does do the OS thing and have an SMSF it does not become a Foreign Superannuation Fund which could then be subject to a 45% tax rate.