Ask Paul: The cost of living in Australia is ridiculous, can we retire overseas?

Dear Paul,

We are in our mid-40s, both working full time and preparing for early retirement overseas.

I have $419,000 in super and Max has $297,000.

We want to travel while we can and have a quality of life that is more than just working and paying bills. The cost of living is becoming ridiculous in Australia. 

We can sell our home and walk with about $550,000 cash.

In 15 years our combined superannuation should be $1 million-plus.

During the next 15 years we can rent a property in a country like Indonesia, Vietnam or Mexico for $300-$400 a month, moving where we like and travelling. Overseas we'd have an approximate total cost of living per month of $850. 

We'd like to invest at least $250,000. We don't plan to work for a living but it's possible we may pick up some work here and there or start a small business.

We have one child in university who is keen to holiday wherever we may be at the end of their studies. 

If we ever do come back to Australia, it will most likely be when we can access our superannuation without penalty and will probably only be able to afford a regional property (we are okay with this) but hopefully our investments and cash situation are still looking healthy by then. 

What is your advice for a couple like us? What figure do you expect our superannuation to be at in 15 years? Any other tips for investing at least $250,000? - Sarah and Max

These are exciting plans, Sarah and Max. I am rather envious.

I love my life here in Australia, but am greatly missing travel.

Living in any of the countries you mention would be a stimulating and challenging experience.

One thing is for sure, you would certainly get more value for your money.

In terms of your super, with a total balance of $716,000, it would be most unusual to only have a balance of $1 million in 15 years. I assume you are in a large, low-cost super fund and only paying for insurance that you need inside the fund. At your age, I would also think you would be in a balanced or growth option.

Obviously, we need to allow for inflation. Currently that is very low, but likely to increase.

Super fund earnings have been off the chart for the past few years, but history tells us that an educated guess of returns above inflation is 4%-5%. Let's call that 4.5%. This would lead to about $1.4 million in 15 years in today's money.

No guarantees there, but history is a pretty good guide.

With your $250,000, providing you have access to a pot of cash for emergencies, in your shoes I'd look at a decent, diversified, low-cost income-type fund that holds a mix of shares, property, infrastructure and fixed interest. There are plenty of these about, an exchange traded fund is one way to get this exposure very cheaply.

It gives me great joy to hear from Aussies who are travelling a different path.

Would you send us a picture and a few words when you settle in whatever country you decide to live in? I would be really interested to hear how it all goes! And I'm sure other Money readers would too.

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