Many property investors' main motivation for building wealth through property is to 'provide for the future' and ensure a stable and stress-free retirement. Have you really looked at your strategy though? And will it be enough?
Blogger: Steve McLean, National operations officer, NPA Property Group
Where do you currently view your retirement strategy?
Analysing clients' investment strategies over the years, one thing has become blatantly obvious! When we start out and are young, retirement just seems too far away or not tangible. As we get older, we wonder why we don’t have enough funds to retire. We have paid off the family home and saved into our Superannuation? I suggest to everyone, place those older, wise heads on young shoulders. Give this the thought and time it deserves!
Government would prefer us to be self-funded at retirement, current policy is a strong indicator of this. Employer contributions into your Superannuation, from 1 July 2014, the super guarantee rate will increase to 9.50% and they will continue to increase in small increments until it reaches 12% on 1 July 2019. What amazes me is that common mistakes are made when individuals thinking this will be enough.
Think of your own situation, how much do you currently hold, how much is being injected, how many years will you be working and contributing, what is the possible growth and future value?
COMMON MISTAKE No1 Many people feel 1 Million dollars will be enough. Will it? Conservative figures see a return of 4%-5% on 1 Million that is a passive income $40k-$50k/year. Keeping in mind this is on today’s dollars. Depending on how long you have to retirement and natural CPI, perhaps 1 million may not complete the task? If you are drawing funds that are more than the balance is producing, the asset decreases and possibly you will be going back to work.
COMMON MISTAKE No2 Thinking all will be fine, as the family home will be paid off! While I agree, paying off the family home is the best priority, even after owning it outright, it will not provide any extra income.
COMMON MISTAKE No3 Failing to diversify. Clients inform me their portfolio’s strategy, shows they will have 2 million Net ownership at retirement. Far too often I see clients with 4-5 properties in the same postcode! Therefore $100k passive income may be depleted through land tax or lack of growth as the region stalls.
COMMON MISTAKE No4 Lack of education or poor advice. Investors employ experts, but I believe it is wiser to gain education and become the expert. This is your financial wealth and freedom, don’t just leave it up to other to decide.
ALL IS NOT LOST - but do not wait until it is too late, give serious thought to this now. As my parents told me, the earlier you start the easier it is. Smaller amounts over a longer time being leveraged in the correct way, can make a massive change in your strategy and financial wealth position.
Ask yourself the following for a start:
Will your Superannuation be sufficient?
How long until your Family Home will be clear of Non Tax Effective Debt?
Will your Net worth provide sufficient funds to retire and protect you from going back to work?
What was last year’s Tax Return and should you be using these funds more efficiently?
Are your current finances structured to gain maximum benefit or am I wasting funds?
About Steve McLean
Steve is the National Operations Manager of NPA Property Group, Certified PIAA Investment Consultant, Mortgage Broker and Real Estate Saleperson.
His current role is expanding the network of NPA Property Group. Understanding the Australian Property Cylces movement and the factors that influence these movements. Sharing this information freely with clients, as he firmly believes that Investors are not focused enough on self education and reply too much on Advisors, Agents and Consultants. The property is only 50% of any Investment Strategy.
Prior to joining NPA, Steve ran his own small business enterprise for 7 years. Steve has been personally investing and building his portfolio for over 23 years.
Through his mortgage broking business, Steve specialises in finance structures, using knowledge gained through developing and building his own property and business portfolio. NPA strategy recommends clients understand how to maximise Capital Wealth in their portfolio through understanding Market movements, tax benefits, depreciation allowances, rental reveiws, while having correct structures and stategies. Risk management is crusial in controlling comfort levels.
Steve has always helped clients build thier portfolio by successfully guiding them through the process from property selection, finance application to settlement, then continuing with regular reviews.
Steve endeavours to provide the highest level of customer service, and is determined to meet and exceed your expectations. Whether you are buying your first home or investment property.