Ask Paul: Do we sell our investment properties to fund our retirement?


Q. I am 64, my wife is 63 and we intend to retire in two years. We own our house and have two investment properties yielding $750 a week.

We have combined super of $630,000 and do not have any outstanding debts. We have $50,000 in shares and $50,000 in savings.

We are both employed and our combined income is $160,000 before tax. We salary sacrifice $15,000 each into our super.

Ask Paul: Should we sell investment properties to fund retirement?

Can we afford to retire comfortably? Or should we sell our investment properties, the current value being $1.5 million, to fund our retirement?

A. Hi, Rodney. To start with I can say things are looking good for you financially. Congratulations on building up a portfolio of assets that look likely to give you a financially secure retirement.

The one thing you don't mention is how much you would want to spend each year in retirement. That really is critical information. But no drama. I'll reverse-engineer your situation and we can look at what lifestyle your assets can support.

First, you have two properties yielding, I presume after costs, $750 a week. Then you have super of $630,000. Add two years of contributions totalling $60,000, and let's assume the fund earns a pretty conservative 5% and you would have about $750,000 at retirement.

If it's invested in a balanced fund, history says that if you take out 4% to 5% a year your money will last you many decades. So let's assume you take $30,000pa out of super. Then you have $100,000 in savings and shares. Let's also draw down from that at around 4%, so $4000 a year.

So it looks to me as though you could spend $73,000 or so a year, linked to inflation, for decades. And this is the big question: is $73,000 enough?

If so, you could choose to keep your properties. But with a yield of 2.6%, I wonder about keeping them both. Here you will need expert, personal advice from a fee-charging professional adviser. But I know I would be very interested in selling one property and having both of you make a large after-tax contribution to super. I suspect you may be able to put in up to $600,000 between you.

This would greatly add to the amount available to support your living costs. This is a complex area, and there may be CGT on your property and so on, so I strongly recommend you talk to your accountant or an adviser before doing anything.


Paul Clitheroe AM is a respected financial adviser and Money's founder and editorial adviser. He is chair of the Australian Government Financial Literacy Board, and author of several personal finance books. Click here to email Paul your money question. Unfortunately Paul cannot respond to questions posted in the comments section.
August 21, 2019 8.23pm

If you can't live on $73k p.a. (tax free, essentially, being over 60), then there's something very wrong.

Ray Hernando
May 21, 2020 3.13pm

Hi, Is it true that if I sell my investment properties once I have retired, I don't need to pay any capital gains on the properties?

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