The concept of GREED

[tech/a]

I have been retired for 7 years now and I can assure you that you don't need 4 million $$, that is too high a figure.

Bill in 25 yrs thats when you'll be thinking perhaps differently.

The figures are based upon paying yourself 90% of your retirement earnings each week adjusted for inflation so for example if you were on $50k when you retired in 25 yrs at 3% inflation compounded youd need near enough to $120k to have the same buying power as you do now.

My father retired 30 yrs ago on $400k which was then looked at like a couple of million today---he only exists because of the pension.

If you have a passive income geared to inflation this will help.

Noika

Its not a figure I come up with its what the calculator posted says.
If you have a play with it youll notice that you can tweek the inputs and if you plan your investments well you can arrive at incredable sums when you pass on.You can also end up penniless well before.

I guess this is when you could do with a "Financial Adviser"!

Wayne----ASX.

You guys just cant stomach that someone can succeed through sound planning can you.

In 1995 Adelaides Southern Expressway came across my desk.I went home that Night and said to my better half that once this was built the South would open up best we start buying houses.Off we went.
True we didnt know things would boom but when in 1998 the 3 properties we had had doubled away we went again.
Business has doubled since then as well actually nearly tripled.
My trading well thats been discussed to death.
Theres luck in everything we do.The more we place ourselves in front of it (Luck) the more likely we are to benifit from it.

'The Concept of ARROGANCE' and 'The Concept of HUMILITY'?

Doesnt matter what I do if I mention my own business as examples its arrogance,and of course I'm showing no humility.

Profound, that is.

My turn to chunder.

Stop

Hows your $50K going in that managed fund?

 

[theasxgorilla]

Tech,
In coming to that figure are you still counting on having the $4m intact when you die?. You can't take it with you.

No you can't, but it would be a shame not to leave a stronger capital base for the next generation, me thinks. Yes I'm aware of the proverb about wealth not lasting more than 3 generations...but you can do something useful with it like invest in infrastructure. How long will the tube tunnels in London continue to serve? Or the autobarns in Germany? Or the 'fjärr varme' heating pipe network in Sweden (built to last 100 years)?

ASX.G

 

[theasxgorilla]

Doesnt matter what I do if I mention my own business as examples its arrogance,and of course I'm showing no humility.

I've got no idea what you're talking about. My post were general thoughts on my point of view regarding the topic of greed. But since we're here...I agree, of course you are showing no humility. That's yours to deal with. My exposure is limited to the handful of minutes a day it takes to read your posts.

 

[Bill M]

Bill in 25 yrs thats when you'll be thinking perhaps differently.

That's just plain wrong. I do not follow the norms, I do not put it in on term deposits and further more I do not listen to nor trust Financial Advisers. This method has given me a path to success.

I invest my retirement money in stocks, property trusts, hybrid securities and convertible notes. Those stocks that I hold generally pay fully franked dividends so I pay NO TAX. The tax problems are already solved. The stocks I own also counter inflation, by that I mean year after year the dividends go up.

Now don't forget I am living proof that this is happening, already retired 7 years. I do not draw on superannuation and I get nothing from the government. My portfolio during my 7 years has also increased (regardless of sub prime and the banks crashing and 9/11).

So in the end, if you cover inflation and tax and can still make a few bucks for your living expenses then you will not go broke. Whilst doing all that you might get lucky and your share price may go up too, no problems here, my system works.

 

[tech/a]

Bill.

Interested in the "mechanics" of your setup---retirement Income stream.

What sort of base do you believe you need?
What sort of return do you aim at each year and what have you achieved?
What do you believe for you is a comfortable weekly income that suits you?

So in the end, if you cover inflation and tax and can still make a few bucks for your living expenses then you will not go broke.

With no passive income other than investments I'm interested in what nett return before tax your getting and the amount of funds your using to do that.

 

[Bill M]

Hello tech/a, I work on a system that the investment must pay me 6% after tax. To get that there are several good blue chip stocks paying this kind of dividend right now.

My hybrids and floating notes pay me 9 to 10%, I work on the basis that the first $6,000 income from them is tax free anyway, after that tax kicks in. Again tax after that (30%) brings me to a net income of 6 to 7%.

Then comes the property trusts, they pay around 8 to 9%, again about half of that is tax deferred. What's left that I must declare on my property trusts I simply apply a 30% tax on it and again I get about 6 to 7% on them.

You now only have to ask a person "how much do they need to live per week" and apply the above.

Some people need $500 p/w others need $1,000 p/w and then some need $2,000. My wife and I live in our own fully paid for unit, have no debts and no kids. We travel overseas at least once a year and go interstate probably twice a year. In think anybody in our position could live very easily on $40,000 to $50,000 (tax paid) per year. I hope that helps, cheers.

 

[tech/a]

Bill

Thank you yes it does help.

So if we say on average around 6% return on investment.
This means you must have $850k starting investment capital.

I'm interested in your comments regarding the following.
Lets say Inflation kicks in at 3.5% on average.

Your capital generating income must keep ahead of this so must increase at a rate of $29,750 a year.
Your buying power will also erode by the same amount so you'll need to generate a compounding income increment of 3.5% a year.
So your 50k needs to be 53k next year and so on from your capital base.

If this cannot be maintained in 10 yrs time you have quite a shortfall based upon 3.5% any higher and the situation compounds.
If rate of return cannot be maintained then this also compounds the situation.

To ignore this in my view is to see your nest egg eroded dramatically in a short time.Infact it is preferable to increase your base capital more than the inflation rate.
Interested in comments

 

[Bill M]

Bill
To ignore this in my view is to see your nest egg eroded dramatically in a short time.Infact it is preferable to increase your base capital more than the inflation rate.
Interested in comments

Yes it's a good debate. I expect that my stocks over time will at least increase in value by 3.5% a year and I also hope dividends keep pace that. That being said and done it just doesn't always work like that (look at all the red ink on the board today.) The other ace I have is that I just don't spend 50K a year, I reinvest back into the stockmarket my surplus income. This is where it is crucial to know how much a person needs to live on for a week. Honestly when I'm not overseas I can't spend $500 p/w, we have no rent, no debts and no kids to worry about. Anything surplus goes back into shares which again increases the capital base. I might add that if I do get to 90 yo and I am ready to fall off this planet earth I really don't care if I have no capital as I don't intend on funding anyone else's retirement except my wife's and mine, cheers.

 

[nioka]

Noika
I guess this is when you could do with a "Financial Adviser"!

I have used them in the past. Never again. The last on cost me half my capital base and he still has a column in a major capital city newspaper. The previous ones cost too much and did not give me any better advice than this forum. I only started to get ahead when I decided to DO IT MYSELF. Some financial advisers may be OK but the advice they give is often outdated by a change in government regulation.
I recently did a job for an elderly lady who wanted to pay for the job. When I told her I didn't want to be the richest man in the cemetary she replied "nor do I". I told her to leave something to the salvos and she said "a good idea". We were both happy.

 

[Julia]

Another factor to consider is that as we reach very old age our capacity to spend as much declines. We no longer do overseas trips and frequently eke out our remaining days in some sort of assisted living environment where our greatest excitement is a bus trip to the local shopping centre.

As Bill says, when you have no mortgage and no rent, have organised your property so as to require minimal upkeep and maintenance, unless you must have new designer clothes and new car every year then you simply don't need a huge income.

There was an interesting article in yesterday's 'Sunday Mail' about retirement.
A few extracts:
Just 3% of people leaving the workforce have enough superannuation to support a comfortable retirement.
Most retirees depend on a full age pension which for a couple is $449 each fortnight.
Of new retirees, 75% will go straight on to at least a part age pension, while 45% will receive the full pension from their first day of retirement, the Association of Superannation Funds of Australia says.
People retiring now, particularly blue collar workers in the private sector, are retiring with $50,000 or $60,000 in super. And a lot of people still have part of a mortgage to pay off.

The above statement that the full age pension for a couple is $449 is a bit misleading. I'm fairly sure it's that much per person, so if the house is paid off a couple can manage on the age pension. It's a whole different story for a single pensioner who only receives about $540 p/f with roughly similar overheads to meet.

 

[ithatheekret]

I understand what Tech is getting at here , but there are larger dynamics involved . We've been buying into the new northern end of the expressway developments . But it was the dual concept of the road that enticed the move .

Semi rural , like the south use to be . Dean Brown will be remember well by the southern areas , especially the Pen . down to Cape Jervis . Get twoways on your expressway Tech and you'll be a squillionaire . Hindmarsh island days of $1K an acre are gone , foundation stone for many families we know .

Ours averaged out around $420/sq.m on 1/4 acre blocks ( improved ) , but it's not an overnight investment . These were half that a decade ago and haven't really jumped on the housing rally and slump . Nice new road opening up the hamlets though .

When I look at the southern area development , it reminds me of the growth of Sunshine , just after the Comm Games . Look what nice big roads and shopping centres did there . Amazing build it and they will come stuff .

 

[Happy]

What upsets me is that not only millionaires make savings, but interest on savings is taxed to the point that money in bank account even with good interest go backward.

Nothing wrong with that, but at the same time even Keven 07 says that we do not save enough, I hope that he can click one day why.

 

[tech/a]

I'd like to bring 2 points to the table for Discussion/Comment related to Bill and Julia's comments.Both are synergistic I feel.

(1) Regarding returning 6-10% on investment,for most who are retiring the thought let alone the capability of returning a profit on 100% of their available capital no matter how small that return seems,is often not considered.Even those who have some knowledge dont place at Risk (Thats is most peoples perception of investment---risk money) more than a small % of their nett worth. Investing 50k to 800k + for most is like asking them to perform heart surgury. So they leave it in the hands of Experts which can lead to experiences like noika has had or far from acceptable returns.A year of loss or static growth can set a plan back many years.
Please see below for other comments related to this----

(2) The idea of having to also grow your capital base by the rate of inflation has all of us counting on out core investments at least keeping pace with inflation. A non performing year or a loss let alone a disaster puts us way behind again.

Pertinent to this is a gem put out by Radge this morning on his site.
So important is it and relevent to my answer to Bill and Julia I place it here in some Doctored form to hopefully avoid ramping issues).

Retirees dont have the luxury of re building capital bases---bearing this in mind!


To: It's normal for humans to do nothing about a problem until it becomes a crisis.

Are we in a crisis?

I guess if you asked shareholders of ABC Learning (-75%), Centro (-95%), Allco (-93%), MFS (-85%), Credit Corp (-94%), you may get an affirmative nod.

Here is a quote today from one of our esteemed financial journalists, Matthew Johnson of Business Spectator:

"The end of last week was so bad that it's tempting to play for a reversal..."

Humans want to give their genius ideas a chance to succeed. We naturally want to believe that if we let it go a bit longer, that things can turn around.

The mistake is not in guessing wrong.

The mistake is in staying wrong.

We also naturally believe that if we cut off everything the moment something goes wrong, that we're quitters. Giving up fast is not something that gains us a lot of respect, but it's exactly what can make a so-so trader into a great one: the ability to give up when it's necessary. And give up fast.


In the words of Warren Buffett:

"Should you find yourself in a chronically leaking boat, energy devoted to changing vessels is likely to be more productive than energy devoted to patching leaks"

Ben Bernanke, Chairman of the US Federal Reserve, used the term Stagflation last week. In the early 70's, the last time Oil went shooting to the moon, we suffered stagflation. The ASX dropped 66% and took 4-years to make a bottom.

4-Years. Think about that.

This applies to all asset classes.Not just share trading.

Interested in all comments

Ithatheekret

I have the plans from Dept Transport on my desk re the Northern Expressway (And its 2 way!!!!).We are looking at the Bridge abutments.
Anyway---there is one GOOD reason why the North is likely to be in more demand and pricing should remain buoyant.

Re the Southern Expressway when your on it next youll notice a corridor of lkand to the west.This is ear marked to take the opposite lanes.
All is not lost only common sence in the initial construction---which this time round will be even more expensive.

 

[Julia]

Yes, I saw that comment from Nick, Tech.
Do you remember Realist?
He would never have accepted Nick's philosophy and I'm embarrassed to say that a few years ago I too would have watched as my ship went down!

My earlier comments were in no way arguing about your super philosophy which you know I share, but think it's realistic to understand that you are not exactly Joe Average and many retiring Australians are going to be quite content with an income which you would regard as being in poverty.

 

[IFocus]

The concept of greed!

My concept is really simple its the thought that runs though my mind when I am $4K up seconds after open

"F### the plan why don't I close my positions now?"

 

[Bill M]

tech/a, this will be the last post I make on this subject simply because it is exactly the same argument I heard 7 years ago. They said, it's not enough, you will go broke, you will be back at work in 2 years, you will jump off your balcony out of boredom, blah blah blah blah blah. They were all wrong.

I look back at the great depression where the sharemarket lost 85% off it's highs. Dividends went back wards 30%. That was the greatest depression in history, the question remains, if they lopped off 30% of my dividends could we survive? The answer is definitely yes, that is still more than the average security guard, checkout operator or council worker makes net after tax. I am not a greedy man and I love the way my life is right now, good luck with your investments.

 

[ithatheekret]

The concept of greed!

My concept is really simple its the thought that runs though my mind when I am $4K up seconds after open

"F### the plan why don't I close my positions now?"

hehehe , never knock a profit hey , it's even better when your dregs end up free and keep rising ...........

And Tech , now I know who's to blame for the whopping great lumps of concrete they drag down that road .
We were at Inman Valley when they started the Southern end , shopped down Victor Harbour for years due to the road works and traffic build up .
But Reynella finally started to blossom after years of looking dowdry .......
Come on the second leg , might have to keep tapping Pat on the shoulder though , he lost down Mile End somewhere

 

[krisbarry]

I notice the new dental check govt assistance ( $150 towards $300 cost) will be effectively means-tested.

We are starting to talk "need" vs "greed" I suspect.

Why is dental excluded from medicare anyway?

Oral Hygiene is critical to human health, wellbeing and asthetics.

Bad oral hygeine has been linked to unemployment, low self esteem, poor eating habits, heart problems, speach problems, social exclusion, bulling etc.

As an ex dental assistant I am and have always been pi_ssed off at the government from excluding dental from the medicare system

 

[tech/a]

Bill.

My apologies for hitting a raw nerve.Even thinking about alternate scenarios can be daunting.Thanks for your participation.

7 yrs ago we began what is now seen as the strongest bull run in our time.The next 7 yrs is very likely to be very different.
In the last 7 yrs we have seen property rise faster than anytime in our lifetimes.
Gold is doing the same.
The AU$ has almost doubled.
Oil has doubled.

On Greed
I think the vast majority of people have to adjust their concept of greed to perhaps one of financial planning.Certainly those in their 30s will have to be thinking Multimillion dollar retirement starting capital or have the capacity of returning 20% or more in your investments.
Once you stop work generating excess wont be as easy as it has been.

Generating 10-20% growth in a 500,000$ portfolio is vastly more difficult than in a $50,000 one----not suprisingly in the psychological department,particularly if your playing with your total lifes savings.
Taking a loss becomes difficult if not impossible for most.

Taking advantage of outlier situations when they present themselves like those above need to be exploited.There are very few who can guide you in these directions,and I doubt they can they be found in one place.

Passive income is very important and there are a number of ways to set this up.Business/Property/Trading,Dividend streams,Futures,Option writing,Spreads and I'm sure many more.All can be low risk and if in the position to take advantage of opportunity when it arises,its suprising how lucky we can become.
Just take a look at Don (Rosella's) excellent Dividend stripping methodology without the massive risk of hoping the underlying price doesnt drop 3 times the amount of the dividend over a year!

https://www.aussiestockforums.com/forums/showthread.php?t=454

A 6% dividend isnt much chop if the underlying has fallen 20% during the period you have held it---not my idea of sound investment practice.