Goals should be specific.
"Get rich" is a terrible goal because it is too broad. "Retire by 50" is a measurable, tangible goal because you can picture it now (and if you can't, I'll help you..)
•Turn 50; have a wicked party,
•Achieve financial freedom,
•Stop work altogether OR work to your own schedule; 1-2 days a week,
•Travel,
•Dine out,
•Buy a boat,
•See Taylor Swift perform live,
•Do whatever you want because your time is your own and you have the financial freedom to do so.
If you are interested in some or all of the above, please check out this episode that addresses the systems, structures and methods to put into place early - in your 20s and 30s - that will see you shake off the shackles of the grind by age 50.
If you would like further discussions on anything financial, please contact us at [email protected]
OR
Click on the link linktr.ee/angeladvisory.aus
Podcast is here
Tom Gleeson
G'day, everyone. Welcome to another installment of the Real Wealth Podcast. Stef, thanks for joining us.
Stefan Angelini
Hi, thanks, Tom. Hi, nice to see you.
Tom Gleeson
We're looking today at the potential to retire by the age of 50, and what that encompasses is why... Well, we'll look at why, but you know why because it's sick. How to get there, who gets there, so kind of not case studies, but how do you get there, look at people who have achieved that, and how did they come to make it happen? Then a bit of technical stuff at the end, so accounting structures of what does it look like for those people that have managed to pull it off.
Stefan Angelini
Bloody oath.
Tom Gleeson
Yeah.
Stefan Angelini
That's going to be exciting. Before we actually get into it, just want to let you know, just general information, please don't consider as personal advice. If you want any personal advice, go and consult your license financial planner. Hopefully, a financial planner that can put you on the path. To retire by 50 if you have all the right characteristics. Characteristics being, one of the main three things that we see when people retire by 50.
Tom Gleeson
As in what how have they got there?
Stefan Angelini
Yeah.
Tom Gleeson
Three ways to get there would be people that are pulling in big income.
Stefan Angelini
Yep.
Tom Gleeson
Particularly starting early. It's not going to work if you land your first fat paycheck when you're 45, it's probably not happening. People that start early work hard pull in big income.
Stefan Angelini
Yeah.
Tom Gleeson
Which also has the potential to then... Or it gives you the opportunity to buy into a business.
Stefan Angelini
Yeah.
Tom Gleeson
Separately to that, invest wisely. I think that one speaks for itself. The last one, my favorite, just run a Mint business. Rather than buying into one, start one yourself, make it sick. Hopefully, by the time you're 50, you have two options: flog it or structure it in a way that you're not required, you're not on the tools five days a week. You're still the owner, still your business, but you're playing golf, traveling, whatever it is. I don't know if that one would appeal to me, playing golf. But I think it's age thing.
Stefan Angelini
When you get there, it's another thing to do. When you're 50. You're like, Oh, that's when it goes.
Tom Gleeson
But right now, I'm like, That's probably like ninth on the list.
Stefan Angelini
Yeah, ninth. Okay. What would you do?
Tom Gleeson
If I was retired by 50.
Stefan Angelini
That's it. Done.
Tom Gleeson
I would travel. There'd be a lot of visiting. Do you know what I would love? The pop-in, the surprise visit. Just jump on a plane and then knock on. Someone's door.
Stefan Angelini
You're going to fly up to Western Australia.
Tom Gleeson
W. A. Darwin, back in South Wales. Knock on the door and be like, Look, whether you like it or not, I'm here for stay.
Stefan Angelini
I'm here for two weeks. You don't have to work and I don't have to work. I'm just going to hang out for two weeks if that's all right. How long will the liver survive?
Tom Gleeson
How long?
Stefan Angelini
How long would your body survive?
Tom Gleeson
I don't even want to think about that.
Stefan Angelini
No. Okay.
Tom Gleeson
It's not barely
Stefan Angelini
Also, we're invisible.
Tom Gleeson
Yeah. Yeah.
Stefan Angelini
That's alright.
Tom Gleeson
I retire by 50 and I can't die. What about you?
Stefan Angelini
I don't know. Everyone says that I'd stop working altogether. I don't think I would. I think I'd take the money and I'd keep investing the money and keep growing. I guess money doesn't do it for me. It's the success and doing stuff and running things. That's what I get excited by. I can't see myself ever just sitting down and going, That's it. It'll be, Right, let's buy this. Let's invest this. You don't do that.
Tom Gleeson
You have to go to. That's it. But what about little periods of just relaxing?
Stefan Angelini
I don't like to relax, clearly. I'm going to go on holidays with Whitney. Whitney's my wife, if everyone doesn't know. She goes, I'm just going to go to massage. You want to come? No, I can't handle it. I can't handle it. I'm just going to get a seat by the pool. Cool. I'll sit by the pool. I'll read a book 20 minutes, I'm like, I'm just going to do something. Maybe I'll just go for a run or I might go climb that mountain.
Tom Gleeson
Start cutting laps to the pool and just ruining everybody else.
Stefan Angelini
Aj, my son, he's a bit cute and fluffy, hey dad, do you want to play? Throw him in the pool and then he'll start crying. I'm like, Oh, man.
Tom Gleeson
Oh, really? Yeah. It went differently in your head. He was going to land, splash, and be like, Dad, that was fun. Let's do it again.
Stefan Angelini
Yeah, let's do it for the next three hours.
Tom Gleeson
He's like, Child, please don't touch me.
Stefan Angelini
But it's all good. I've got a daughter who happily let me throw her around for three hours.
Tom Gleeson
Really?
Stefan Angelini
Yeah, she's psycho. Like me.
Tom Gleeson
Yeah, you are. Okay.
Stefan Angelini
Anyway, that's enough of our little things, but.
Tom Gleeson
How can we ask that people comment what.
Stefan Angelini
They would do? That'd be nice.
Tom Gleeson
Yeah. Because I think we've just showed two very different extremes of,
Stefan Angelini
Yeah.
Tom Gleeson
I'd be traveling, I'd be relaxing.
Stefan Angelini
Yeah.
Tom Gleeson
You'd be working, buying stuff, you're an idiot. Chuck a comment below of what you do, if it's different, if it's interesting.
Stefan Angelini
We've spoken about different ways people get there, earn lots of money, earn lots of money, buy into a business. That's how you normally make extra money, extra dividends, and then maybe run a sick business and sell it or set it up so you don't have to be there anymore. By 50, you parachute and you're good and you go and do whatever you want. How do people invest on the way they're different ways to do it.
Tom Gleeson
As in what? Is this for the business owners or is this for everybody?
Stefan Angelini
Yeah, we're in the period. We're like, We've got a target 50. Are we going hard? What are we investing into?
Tom Gleeson
So focus would be on investing in growth. So as opposed to income.
Stefan Angelini
Yep.
Tom Gleeson
Still a balance, but with a focus on growth, if the goal is to, as you said, smoke bomb at 50. Then the other one is, which I'll probably get you to go into in a bit more detail, is using debt to amplify your returns.
Stefan Angelini
Yeah, other people's money.
Tom Gleeson
Yeah.
Stefan Angelini
If you can use other people's money to make more money for yourself, then we're doing well. That's why a lot of people in Australia have to buy property because typically you'd make a better return than what you're paying in interest.
Tom Gleeson
Yeah. Okay.
Stefan Angelini
If you can maximize your debt levels, then fantastic. Or if you go, Well, I'm going to buy an asset. You'd buy an asset for, call it 500 grand, you'd borrow $400,000, and then that asset would then grow to $600,000. You get rid of it, you've made 100 grand, you've doubled your money.
Tom Gleeson
Yeah.
Stefan Angelini
Whereas if you had to go and buy an asset with cash for 500 grand, you got to save up to get there, then you make 100 grand, you've only made 20% on your money. It's a lot faster to get there if you can use other people's money.
Tom Gleeson
That's interesting. I hadn't thought about it like that, but just homeownership is just a very common, very relatable example of use someone else's money, amplify your returns.
Stefan Angelini
Yeah, exactly right. Get into a better asset. If you look at making a percentage return, if you make a 7% return on $2 million, so $2 million asset, then in 10 years, it's worth $4 million. But if you make a 7% return per year on a $500,000 asset, then it's worth a million dollars.
Tom Gleeson
Yeah, okay.
Stefan Angelini
So if you can get a larger asset, you make that return still better off. That's why a lot of Australians now are retiring just by selling their house. Downsizing.
Tom Gleeson
True.
Stefan Angelini
Yeah. All my wealth has gone into my property, I've renovated, I've lived there, brought my family there, and it's paid off. Expensive to live in Australia, it's paid off. Do I need a big four-bedroom house? Not really. I'll sell it, I'll take that money. I'll go and buy a smaller house and I'll live with that money in retirement. That's cool.
Tom Gleeson
They're good. Or you could do what my parents do and just hang on to it with all the empty bedrooms.
Stefan Angelini
Yeah.
Tom Gleeson
I don't know why. They're so good.
Stefan Angelini
I think we enjoy that.
Tom Gleeson
Hey, mom and dad.
Stefan Angelini
Sell the house. They might keep you busy. They're quite cleaning.
Tom Gleeson
Yeah. Next thing to look at is what do you need to do when you're there?
Stefan Angelini
Well, yeah, when you're there, the situation changes right because you're more sustained and sustaining your money for as long as you can, earning really good money. You can keep going for growth. I think that's part of it because you want diversified. You want some growth assets there that's still building the portfolio. Normally, when you get to that period, you can start investing in quite a different way to how the 1% would invest because you're retired, so you should have a lot of cash to get you there. But a lot of focus on passive income. So how am I bringing in income to replace my income?
Tom Gleeson
Okay.
Stefan Angelini
That's where a lot of the focus is drawn to.
Tom Gleeson
We're not only bringing income returns to replace your employment.
Stefan Angelini
Yeah, exactly right. You just got a business set up there that's generating lots of returns anyway, but still, then you go into the factor of, Well, how do I diversify my income streams? How do I have other kinds of diversified income streams or diversified assets? Because you don't want your entire portfolio. If you're investing one asset class, go and down. Then what happens? You're like, Oh, shit. Now I haven't got any money. My assets aren't worth that much. What do I have to do? I've got to go and work.
Tom Gleeson
You're going to start again.
Stefan Angelini
Yeah. It's a real killer. That's why diversity at that point matters. Income, diversity, security. Make sure you don't lose all your money. And really what happens is your risk tolerance, because you've made it, you're there, you don't need to take on as much risks and you don't want to.
Tom Gleeson
That's I wanted to go back to something you said before because you mentioned once you get to this point, you're going to shift somewhat away from growth. You're going to invest the alternative of being defensive.
Stefan Angelini
Yep.
Tom Gleeson
Right. Preserving what you've built. Are you not shifting completely defensive? I'm retiring at 50. I've built all of this. I'm not doing growth anymore. We are that this is defensive from now on, but you can't afford to. It's still a balance.
Stefan Angelini
Still a balance. I think it's still a balance. No, I said it's because it's easier to spend money. You want the money. You want the income replacing that's bringing in the money every week.
Stefan Angelini
Bring in the money every week. But then you want the growth that's still pushing up the rest of the portfolio
Tom Gleeson
Okay.
Stefan Angelini
So that your money lasts longer. Because when you're 50, you still want to live to 100. You've got another 50 years to go. If you're just focusing on income and you're slowly draining away your money, it's like take, take, take, take, take, take, take little bit by little bit, it's all shit. We're taking a family on holiday now. That's extra 50 grand here. We're going this way. It's $100,000 over here. Before you know it, the income is not replacing your living expenses. You need that growth assets that's generating that 8, 9, 10% return over time to be able keep pushing up the portfolios.
Tom Gleeson
Yeah. Okay.
Stefan Angelini
That's the way we see people and we invest for people that are at that point is make sure it's low risk, higher risk diversified. So you really talk about protection, but also looking towards the future and how are we going to get there?
Tom Gleeson
It's also a good reminder. That would be a time to have a conversation with whoever your advisor is, your planner. When these big changes come along, I've just sold a business, you might not realize it, but they will tell you, We're going to have another look at your risk tolerance because your situation has changed. We had you here, you need to be more here. But it wouldn't necessarily occur to someone who's just sold their business that things have changed, need a re-assessment, essentially.
Stefan Angelini
Yeah. Especially if you've sold a business and you don't have the income stream anymore, completely different kettle. If you've got a business that's generating profit, paying dividends, and you've got a regular income stream already.
Tom Gleeson
Yeah. Okay.
Stefan Angelini
But if you don't have that regular income stream from.
Tom Gleeson
Something, it's got to come from somewhere.
Stefan Angelini
Yeah, that's right.
Tom Gleeson
How are you going to structure it? Where are you going to draw it from?
Stefan Angelini
Yeah, exactly. But normally when you're still in the business at 50, you're doing something with the business. You're still stressing a fair bit even if you've got good people in good places. Then we go into the accounting structures.
Tom Gleeson
So the technicalities of it.
Stefan Angelini
Yeah.
Tom Gleeson
What does that look like?
Stefan Angelini
Tax matters. People normally think, Why would I use my super? Why would I use my super? Because when you're at 50 and you're retired, tax is an issue. Tax on exits is an issue, tax on investments is an issue. You're invested through trust. You might use family trust, bucket companies to invest. So your family trust is you can then choose of who in your family gets money. It's a lot tighter now of who you actually give the money to, especially if you're in the investing. You can use these bucket companies to shoot money off to a separate company that can eventually pay you a dividend over time. You can invest in there and you pay tax, let's say, 30%. That's where it's like, you're investing through the discretionary trust, you're investing through these bucket companies over time so that when you are retired, you pull money from these leavers, pull, pull, pull. But still like, you can't get access to your super until you're 65. But let's not forget is that we're going to be here for another 50 years when you're gone at 50. What's the most tax-effective structure you can have?
Tom Gleeson
Super.
Stefan Angelini
So up until you're 60, at the moment, if you're 60 and you're retired, you can change to what's called an account-based pension.
Tom Gleeson
Yep.
Stefan Angelini
That is no tax on earnings if you got less than 1.9 million super, no tax on withdrawals either. So you think about it. You need to be pulling money from these trusts and bucket companies you've got once you get to 60 because you can start to use your super.
Tom Gleeson
Yep.
Stefan Angelini
So if you're overtime, if you're thinking, right, 50, do I need to be focusing on my super? Throughout that time, we say, Yes, you get tax reduction of putting money in. It's your long-term portfolio. So you rely on your trust in your companies to get you that survival until you're 60, 65. And then you go, Right, here's this bucket of super money that I'm not paying any tax on now, and they can access tax-free. That's going to give me the rest of my journey.
Tom Gleeson
Yeah. Okay.
Stefan Angelini
Then you just restruct your assets. All the growth is through super, some income is through trust and bucket companies, and you're on your way, you're on your journey. But where assets are invested ends up mattering because it's going to affect your taxes and taxes affect your net return.
Stefan Angelini
So what's left in your pocket at the end of the day? An issue for people with a lot of money.
Tom Gleeson
Yeah. Okay.
Stefan Angelini
Which is a lot of what we do. Try to make sure that tax rate is low so you get a better net return after tax, of course.
Tom Gleeson
There's a fair bit to it in terms of the structures, the accounting stuff. It also sounds like that's a key period. If you're one of these people that's retiring at 50 and it's not until 60, you can take advantage of what comes with retirement in super. That's key 10 years for planning. How are we going to structure it? What does this look like? How does it play out?
Stefan Angelini
Yeah, exactly. But you know what I say? More money, more problems.
Tom Gleeson
Yeah.
Stefan Angelini
More things to think about.. Yeah, that's right. I made that up myself. So yeah, there's a few things that go into it. But hey, what a cool thing. If you're able to get there, it's a pretty awesome achievement. You've done well. It's a big take my hat off to you. If you are one of those people that are able to get there, you have a lot of people looking to you for guidance and for wisdom because, hey, super effort. We've got a few of them on our books, so well done to you people. Keep striving for great things. Tommy, I reckon we leave it there because I've spoken enough.
Tom Gleeson
Yeah, perfect. We better wrap it up.
Stefan Angelini
All right, I'm going to get prepared to go buy more businesses and to retire by 50, and we'll book you a few flights over to WA and NT, or you can just sign them up as clients and work trips.
Tom Gleeson
Oh, that's good.
Stefan Angelini
That's right.
Tom Gleeson
I like that.
Stefan Angelini
Work trips. I've got phone calls from them.
Tom Gleeson
Sorry, I never gone up.
Stefan Angelini
All right, guys, thank you all for listening yet again to another episode of Real Wealth.
Tom Gleeson
Thank you.
Stefan Angelini
Thanks, Tommy. Stay soon. Cheers. Bye.
Tom Gleeson
Bye.
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