It’s a sad prospect, but most Aussies will spend 15 – 30 years in retirement, either totally or partially dependent on the Age Pension. That’s a long time for millions of retirees to struggle on very modest incomes.
Currently, the ‘Single’ Age Pension is $24,770 p.a. and the ‘Couple’ Age Pension is $37,341 p.a. (Figures include Pension Supplement and Energy Supplement).
According to The Association of Superannuation Funds of Australia (ASFA), to enjoy a ‘comfortable’ retirement, single people will need an income of $43,687 p.a. and couples will need $61,909 p.a.
To earn these income levels exclusively from superannuation, a single retiree would need $873,740 in super and a couple would need $1,238,180 (assuming a return of 5% p.a).
Unfortunately, most people don’t have anywhere near those amounts when they retire. Figures published by ASFA reveal that men who retired in 2016 had average super fund balances of only $270,710 and women had very low average fund balances of just $157,050. Combined, these sums would only generate an income of $21,388 p.a. (assuming a return of 5% p.a).
Without a part-pension to augment their meagre incomes, these people would be living below the poverty line.
The good news is that retirement doesn’t need to be about frugality and deprivation. Below is a simple property strategy that average wage earners can utilise to build a solid asset base and strong passive income stream to sustain them in comfort for decades.
NOTE: While spruikers and marketeers often say you need 10 or more investment properties to have a financially secure retirement, I’ll show you how to achieve it with only 2 or 3 properties.
The secret is to invest in Cashflow Positive Co-Living homes!
While traditional houses earn a gross rental yield of around 3% – 5% p.a. ($317 – $529 per week on a $550,000 property), Co-Living homes of the same value should achieve 7% – 8% p.a. ($740 – $846 per week). This gives you up to $27,500 extra per year to pay down debt or build a deposit for your next Cashflow Positive investment property.
In real terms, Cashflow Positive properties cost nothing to own and generate an after-tax return of thousands of dollars each year for most investors.
This means that average wage earners should easily be able to pay 2 or 3 of these properties off during their working lives and set themselves up for a very comfortable retirement.
Just two unencumbered Co-Living homes rented at $800 per week each will return $80,000 p.a. (assuming two weeks’ vacancy per property). After deducting expenses such as rates, water charges, management fees and insurance, plus allowance for tax deductions and depreciation benefits, a single retiree would have an after-tax income of approx. $50,000 p.a. ($962 per week).
If a couple owned three Co-Living homes they would have an after-tax income of approx. $75,000 p.a. ($1,442 per week).
Remember, to achieve ASFA’s definition of a ‘comfortable’ retirement, single retirees will need an income of $43,687 p.a. and couples will need $61,909 p.a. Owning just 2 or 3 Co-Living homes allows you to exceed ASFA’s financial targets (and roughly double what you’d receive on the Age Pension).
In addition to the strong passive income stream you would also have an asset base worth millions. This gives you the flexibility to sell one or more properties if you need a lump sum to buy into a luxury retirement resort, or for expensive medical care, or you may wish to give your children an advance on their inheritance.
Of course, if you have the desire and financial capacity to build your portfolio beyond three Co-Living properties, then go for it!
I created this simple investment strategy so that average wage earners can retire financially secure and really enjoy their golden years.
To start your investment plan, please contact Brian White on 0418 360 490 or firstname.lastname@example.org
NOTE: Returns will vary depending on your personal circumstances. Always seek independent financial, legal and taxation advice before making any investment decision.