Ask Paul: Should we retire to China for a lower cost of living?

Dear Paul,

We are in our early 40s, with no intention of having kids.

We jointly own three properties located in Melbourne - two investments and one that we live in. Their total current value is around $2.35 million, with total debt of $1.16 million ($280,000 variable home loan and the rest as a fixed investment loan).

My husband works six days a week, earning around $120,000 a year (he has an ABN). I am on $90,000 a year.

We live with my mother-in-law, who is in her late 60s and very healthy. She has no assets or income but will receive a pension from mid-2024 (she migrated from Ukraine eight years ago). 

Our super is a big concern, as I have about $120,000 but my husband has only $30,000.

We have about $60,000 in a savings account and $50,000 in shares.

We both want to retire around age 55, but are worried if we'll have enough money to support us as our super is not that high and we may not receive a pension due to the assets we have. 

We have thought about retiring in China, as my parents have a house there, so our living expenses are not high, but as we are both Australian residents now, it might be difficult to do so. 

What else could we do except start putting more money into super? The sharemarket is not performing well and we have already lost $30,000 in the last financial year. - Sissi and Andriy

Having children is a very personal decision, Sissi and Andriy, but having raised three of them with my wife, Vicki, I can say with great confidence that they cost a fortune!

We adore our three kids and now three grandkids, but the economics of kids I don't want to think about. And it is not just expenses, in our case, we were on one income for a very long time.

However, having decided you are not having children, with the assets you already own, you are on financial cruise control. With a combined income of $210,000, you will have ample surplus income.

Here I agree with you: topping up your concessional super payments to the maximum $27,500 a year each makes a lot of sense to me.

In my answer to Simon, I looked at the issue of super, which, like property, has been falling in value. My view has always been that the best time to buy quality assets is when they get cheaper, so I would argue this is a good time to top up super. The long-term returns from super have been very good, as is the case with property.

Additional investments also depend on your attitude to risk. With interest rates going up, you could put more into an offset account on your home mortgage. This is your safest option. It would reduce the amount of non-tax-deductible debt you have and build a pool of money for future investments.

If property values fall further, which is a reasonable possibility, providing you feel you can handle increased debt repayments, then you may want to add to your property assets. I do need to stress that this is a very personal decision based on many factors that only you can determine.

As for living in China, that is not a decision that I or any expert can assist you with. But I would not be moving to save money.

You have substantial assets and with a continued focus on building wealth through super, your properties and other investments, I have no doubt that by age 55 you will be very financially secure, allowing you to choose where you want to live for lifestyle reasons, not money.

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