Sunday, November 01, 2009

Product Newsletter 1 November 2009

If you're already 50, the only way to have enough is to create a portfolio of off-the-plan investment properties


With all the hoo-haa surrounding the Spring Racing Carnival, I was reading another story in the press about Bart Cummings.

The journalist had asked “what’s the secret of your success?” and the magician replied “I’ve got a formula that works.”

And then I heard myself saying out loud “Hey Bart, that’s my line!”

If you want me to help you explore options for 20-25 years of comfortable retirement, contact me – Bernard Kelly – on 414 778 518 or email


When asked by my private clients to justify my approach to creating serious wealth for them, I simply refer them to the BRW Rich List.

It only takes a few moments to realise that two thirds of members on that list started out as ordinary folk, but they invested in property – not equities.

Now it’s probably too late for you to become mega rich like they are, but I have a very successful (residential property) investment strategy that can help you prepare for 20-25 years of comfortable retirement.

If you would like me to explore your options, feel free to contact me – Bernard Kelly – anytime. My email is and my mobile is 0414 778 518


Over the years, I occasionally get asked that question.

My response now is “it’s like going out fishing for the day. Your success will depend – to a large degree – on the knowledge, skill and wisdom of the charter boat skipper. He’ll do everything in his power to ensure that the odds are in your favour”.


The truth about retirement planning is there is no such thing as perfect. In the end it is all a rough approximation anyway.

However here are four simple rules-of-thumb for retirement planning that will at least get you in the ballpark until you have the time and inclination to sharpen your pencil…

10% Rule

In 1913, George S. Clason wrote “The Richest Man in Babylon ” which remains popular even today.

His formula is - in general terms – save 10% of whatever you earn and invest it with long term returns around 10%.

Your investment portfolio will eventually grow – over 35-40 years - to the point that it can support your future (modest) lifestyle.

This is basically the way superannuation in Australia will eventually work (for the young).

The “Millionaire Next Door”

The formula in “The Millionaire Next Door ” by the authors Stanley and Danko is to multiply your age by your pre-tax annual household income from all sources except inheritances and divide by ten.

For example, if you are 55 and earning $80,000 per year with no inheritances, then your net worth should be $440,000.

Personally, I don’t find this formula of much use given today’s expected longevity for most of us.

12 Times Income

A more realistic approach has been advocated by Jonathan Clements, author of “The Little Book of Main Street Money: 21 Simple Truths that Help Real People Make Real Money ”

He feels that a reasonable retirement nest egg should be 12 times your income to provide for a moderate income until your “estate event” happens.

Clements makes a few assumptions:
1. your income increases to match inflation,
2. you draw 5% of your savings as income the first few years of retirement, and
3. you achieve an investment return of 5% after inflation.

On this basis, your retirement income should be around 60% of your pre-retirement income.

Purchasing Power

However, my favourite rules for simplifying how much is enough to retire is to multiply your expected annual spending for your first year of retirement by 20.

So if you wanted a retirement income of $50,000 today, you’ll need $1,000,000 in investments, with a yield of 5%.

However if you wanted an (inflation protected) annual retirement income with purchasing power worth $50,000 today, you’ll need $1,000,000 in inflation protected investments.

And the only asset that I know of which can achieve this for you easily is a portfolio of residential property investments

The future is unpredictable and conventional financial planning for retirement is based on mathematics and an accurate prediction of the future.

These are serious flaws because the truth is that many unknowable factors will determine your financial needs during retirement, and those will only be known in the fullness of time.

If you would like me to help you explore your options, feel free to contact me – Bernard Kelly - anytime. My email is


Here’s an interesting article

It starts: “Pension managers and corporate treasurers deploy a funding strategy that matches the maturity of an asset to the maturity of a liability so they know they will have the cash needed to pay off the debt when it comes due.

“If you think about this technique, you could use it to do the same with your own pension or retirement liability.”

I won’t bore you with a repeat of the methodology, however for a person aged 40, earning $40,000 with a plan to retire at age 60 with the “estate event” pencilled in for age 100, the mathematics suggest that this person will need to retire – 25 years hence - with $2,474,997 invested.

Bernard Kelly 0414 778 518

PS: I’m happy to accept the fiduciary responsibility to always act in the best interest of my private clients.