Expert Advice by Paul Wilson
19/10/2012
Calculating Your Income Level For Retirement?
When I ask investors why they want to be involved in property investing a popular answer is that they want to be financially independent in retirement, if not before.
Therein lays the problem, because often people do not know how much income they will need to have to live a reasonable lifestyle in retirement.
For some investors retirement could be 20 or 30 years away and who can accurately calculate costs that far out?
Working Out What You Need
Consideration needs to be given to the number of years that are left to become financially free, as well as the current earnings that can be put towards retirement income building. It also needs to be remembered that we are living some 10-15 years longer that our parents did and if we retire early this leaves even more years for funding.
Another point that needs to be taken into account is the fact that when you are not working you will have more time on your hands and your ‘entertainment’ costs will most likely be more than you would spend while you are working.
It is more than likely that you would want about 65% of your pre-retirement income as your retirement income.
Using Today’s Income As A Guideline
Let’s say you were retiring today:
Assuming that you own your own home and you want to have between $850-$1,000 per week after tax in today’s market as your income base then equating that to rental income it would mean that you would need to have at least 3 freehold properties from which you get rent and even then the rent would need to be above average, somewhere between $450-$490 per week.
Allowing for deductible expenses of running the properties you will end up with about the $850-$1,000 per week to live on that you desire.
A report from the Assn. of Superannuation Funds of Australia states that “for a modest lifestyle a single retiree would need $363 pw and a couple $509 pw” whilst “for a comfortable lifestyle a single retiree would need $702 pw and a couple $939 pw”
So What Are Your Financial Goals For Retirement?
Having read the figures above, a property investor then needs to plan how they will manage and finance their portfolio to allow them to have those 3 freehold properties (or more depending on your financial goals) by the time they retire.
Paul Wilson is an Independent Property Investing Expert and the founder of We Find Houses, Educating Property Investors & We Find Finance. Paul has been educating and coaching investors since 2001. Paul provides valuable, independent guidance and support by teaching strategies on how you can invest successfully while protecting yourself from commission hungry sales agents and property spruikers. Protect yourself with knowledge, contact Paul today for a complimentary consultation on 1800 600 890 or email paul@wefindhouses.com.au
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Disclaimer: while due care is taken, the viewpoints expressed by contributors do not necessarily reflect the opinions of Your Investment Property.
