Could you live the way you want in retirement?
Watch this short video clip.
Did you realise...
by the time you are 65 there will be a
- 45% Chance You’ll depend on family for financial help.
- 28% Possibility you’ll rely on a pension.
- 22% Likelihood you’ll still be working.
- 4% Probability you’ll only meet your basic needs.
- 1% Chance you’ll be financially independent.
If the thought of retiring scares you, now is the time to act! Retirement, financial freedom, a holiday property, the kid’s education, helping the kids with a deposit on a home - CHOICES. The best reason to invest is to have choices. Most people, although they love their work, would prefer to have the choice of when to stop working. The question is, could you live the way you want?
How Much Will You Need?
To the right is a simple formula to allow you to see how much you will need in income-producing assets to fund your retirement. If you plan how much you want to live on a year once retired, knowing that you could be in retirement for at least 20 years, you will see how much you will need to have accumulated by retirement. This does not take into account inflation and is calculated in today’s values.
Beat the Clock
Advances in medicine and technology, combined with healthier lifestyle choices, has resulted in an increase in life expectancy. Women are now expected to live to the age of 83 and men to the age of 79. This would mean if we retired at 55, we would have to fund ourselves for at least 20 to 25 years if we don’t want to live on the pension.
10 simple reasons why you should choose real estate as your investment vehicle.
There is no other investment class or asset that gives you as much control as real estate, and control is the most important factor for any asset. As previously mentioned, many think investing is risky due to having no control over the asset in which they invest. There is little control for the investor in shares, superannuation and managed funds. Here are the ten best reasons you should choose real estate as your asset class.
1. Leverage – Banks will loan more money against real estate than any other asset class. Whilst lending criteria is tougher than it was a few years ago due to the global credit crisis hitting in late 2008, it’s still possible to be able to borrow 90-95% of residential real estate’s value. With shares, you’ll be lucky if your bank loans you 50-60% of the value considering the recent poor performance of the share market (late 2008). Leverage, and the ability to get finance will ultimately determine how rich you will be.
2. Cash Flow – Your money comes in every month, you don’t wait a year to see if the company made a profit or if they intend to pay a dividend.
3. Amortisation – The tenant helps to pay off your debts over time.
4. Depreciation – The government offers tax benefits for real estate, as the building, fixtures and fittings will need to be replaced over time. In reality, the government offers tax breaks to investors because they provide much needed housing, without which, they would have to provide themselves.
5. Creativity – You can improve the value of a property by being creative. This could be as simple as a renovation or more detailed like a change in zoning, or building units and townhouses on the block.
6. Predictability – Once the management and tenant are in place the result is predictable. The money comes in every month from your property manager. This sure beats watching the stock market for when to buy and sell. You can also choose to hire and fire the management of your property at any time.
7. Invest using pre tax dollars – By completing a Tax Withholding Variation you can get your tax return back in your pay each week. Your cash flow is better as you don’t need to pay for your investment after having your income taxed. This means you essentially pay for it before paying tax. Read more about this form in the Tax and Asset Protection chapter of the book.
8. Capital Growth – Well-located property has doubled in value every 7 to 10 years since the 1960’s. As the property improves in value, you can access that growth (called equity) to buy more property, spend, or fund your retirement. All tax-free.
9. Liquidity – You don’t need to sell your asset in order to get cash out of it. With shares you must sell them to be able to access your gains and when you do you’ll pay tax and brokerage fees. With real estate you can simply get a line of credit against the equity you have built up, thus avoiding tax and agent fees. This makes property far more liquid than shares and especially superannuation, where you can’t access the money until retirement. You will understand more about lines of credit in the finance chapter of this book.
10. Time – Real estate does not change rapidly. If you own shares, you’ll have little notice that the share market is going to crash. It will just happen and then you’ll need to react when its too late. A great, or should I say bad example are the sudden falls in the share market toward the end of 2008. Very few people saw such huge falls on the horizon and it caught everyone by surprise. Real estate gives you the opportunity to see changing trends ahead of time (like hot spots, new infrastructure, rising interest rates etc) and make necessary adjustments to ensure you are well placed for the future – keeping you in control.