Originally Posted by Unregistered

I cannot tell if this post was a serious post or not, but if it was, I can only feel pity on the naivety of the poster.

First of all, if you are not already invested substantially in stocks, it would be very difficult to pump in a huge amount in stocks in a short time. I cannot imagine you would pump in $1.5 m into the stock market within a year to start generating that 5% return. More likely you would want to catch the "right" time to enter and spread out your investment. So in short, you will not be getting that $75k pa returns, not for a good many years.

Secondly you would not be putting all your money into high dividends stocks (eg reits), but more likely spreading out your investments in other blue chips (steady but lower dividend income). So the net returns will be less than the 5% you are expecting.

Thirdly, downgrading from your current property is easier said than done. If your children are still staying with you then you will still need a home that is big enough to accommodate your children as well.

Fourthly, the expenses you mentioned are in today's dollars. 10 years down the road, in order to maintain the same purchasing power, you will be chipping away from your principal amounts. From there things will spiral downwards rapidly.

I am saying all this from my own experience. We all plan, but reality is a different matter.

My wife and I have been investing all our lives (30 yrs since we started work). When our investment in stocks hit $1m (based on market value, not our invested outlay) two years back we decided we were sufficiently "exposed". We didnt want to put all our eggs in one basket. We are now getting roughly $50k pa dividends (it differs year by year). To mitigate risk, we then invested in another condo, but smaller one (2 + 1 bedder). Our plan was to eventually downgrade to this smaller one when we retire.

But that is not going to happen until our children get their own homes which we think would be a good 10 - 15 years later. By then we would be 65 or 70 yrs old! So we rented out the second condo to earn $45K rental income.

The total passive income of $95K pa is still below our current yearly expenses of $120K pa. Even taking away the car expenses, maid (if we decide to do away with the car and maid), and income taxes when we retire, the $95K marginally covers our expected retirement expenses.

And when you factor in the effect of inflation into the yearly expenses, you will quickly realise that your yearly expense will outstrip the passive income in a matter of a few years!

Having done our calculations, we quickly realised that it is to our best interest to continue working for as long as we can.