Its almost a dirty word that we’re not supposed to bring up in public, but the truth is that everyone should have a plan for retirement. Consider these figures:
By the time we reach 65, 24% of kiwis will have died, 54% will be on a pension or welfare, 16% are still working for a living, 5% are financially independent and only 1% are wealthy and financially secure. So over half of us will be living on the pension or welfare – currently that’s $348.92 after tax per week. Even if you are living mortgage free, that still is not enough to pay for food, petrol, clothes, holidays etc etc. That doesn’t paint a rosy picture.
If $348.92 a week isn’t enough to live on, how much is enough?
Well it all depends on what you want to be doing in your retirement. If you are content to sit on the beach and read then you won’t need as much as someone who wants to spend their time travelling the world. A good rule of thumb is about 75% of your current income. So if you are earning $40,000 now then $30,000 will provide you with a similar lifestyle after you retire (assuming no mortgage). That’s about $575 a week. (We’re ignoring inflation in the interests of simplicity)
But how much do you need to save in order to receive this as a passive income?
Lets assume you live to 85 and can receive 5% interest on savings, you’ll need to save about $375,000. By the time you reach 85, the savings will have run out. So what if you live to 90 or 95? What happens then?
A much better way is to have an asset that both pays you to own it and continues to grow in value year after year. This way your retirement only gets better and better the longer you live and you have a legacy to leave to your family.
A property investment portfolio is the perfect way to ensure an on-going passive income well into and beyond your retirement years. There are many ways to structure a portfolio and many strategies for building it, but one thing is for sure, if we rely on superannuation to fund our retirement, we better make sure our bucket list has been cleared before stop working.
Oh and remember, be good to your kids, they choose your retirement home!