I am 43, newly single, with shared care for an 11-year-old. I have a $550,000 mortgage, fully offset. I’ve got $345,000 in super in a high-growth allocation. Separately, I have $85,000 of ETFs and $140,000 in savings. I have no debts. I’m in a well-paid job (circa $210,000) which I’m looking to leave to start my own consultancy business in the next 12 to 18 months, which would involve a significant pay cut. I’d also like to relocate in 10 years to a small regional town where I can work from home and taper off the need for full-time work.
I’m not certain how to best set myself up for this goal financially? Should I be looking at an investment property using my available cash as a deposit or continue to invest in equities (either through direct investments or upping my super contributions)? I’d also like to start a 10-year insurance bond for my child to help her with getting a deposit for her first home.
It’s important to get your priorities clear when planning an early retirement.Credit: Simon Letch
Great to have that clarity on your goals, this is an essential first step to successful financial planning. I suggest you reflect on the prioritisation of these goals. Is it as you have listed them here? I often find that the order goals come out of people’s head does not reflect the actual order of priority.
Prioritisation is important here, as making a career change that results in your income halving pushes against the achievement of your relocation and retirement goals, and also provides less for the investment for your child.
Ideally, you would get some financial modelling done to understand how the goals of career change, tree change, and semi-retirement/full-retirement will mesh. This might also inform how aggressive you need to be with your investment strategy.
Given all of your goals are to occur before age 60 it would seem to me that accumulating wealth outside of super makes the most sense. You are currently in the top marginal tax rate, so you could consider negative gearing if that aligns with your risk appetite, though this would be less attractive post your career change.
Note that this need not be property, where the risk is magnified by holding a single asset and therefore a single tenant. You have experience with share investing. Perhaps you use some equity in your home to gear here. The diversification possible would significantly reduce the risk, provided you have a 7-year plus (ideally 10-year) time frame.
Note that with the insurance bond, whilst there is typically no additional tax that needs to be paid once held for more than 10 years and sold, this does not mean no tax is payable overall. Insurance bonds pay tax on their earnings at 30 per cent. Whilst your income is at its current level, this would be attractive, but perhaps it is less so after your career change.
I want to retire early. How do I plan for this financially?
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16.03.2024
I am 43, newly single, with shared care for an 11-year-old. I have a $550,000 mortgage, fully offset. I’ve got $345,000 in super in a high-growth allocation. Separately, I have $85,000 of ETFs and $140,000 in savings. I have no debts. I’m in a well-paid job (circa $210,000) which I’m looking to leave to start my own consultancy business in the next 12 to 18 months, which would involve a significant pay cut. I’d also like to relocate in 10 years to a small regional town where I can work from home and taper off the need for full-time work.
I’m not certain how to best set myself up for this goal financially? Should I be looking at an investment property using my available cash as a deposit........
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