She's A Teacher With 2 Properties By 31. Can She Retire?

Jenna is 31 and already owns two properties... but like most people, she has no idea what she's actually on track for. So, we built her a full Wealth Plan, live, and revealed the number she'd never seen. In this episode, Ed and Andrew build Jenna's plan from scratch, from her perfect day in retirement to the shortfall she's facing. You'll learn: A live demo where we create a wealth plan for a listener on the show How much money will she need to create her ideal money life What actually happens when you create a wealth plan with Opes PartnersThe lesson? Almost nobody knows their number... even people who already own property. Once you do, you've got choices. Start your path to financial freedom with a detailed Wealth Plan for $0 https://www.opespartners.co.nz/book-your-free-session-2?utm_campaign=nav-cta For more from Opes Partners: ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠Sign up for the weekly Private Property newsletter⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ https://www.opespartners.co.nz/newsletter-sign-up⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠Instagram⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ https://www.instagram.com/opes_partners/⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠TikTok⁠⁠⁠⁠⁠ https://www.tiktok.com/@opespartners

• 0:08Speaker 00

  Hello and welcome along to the Property Academy Podcast by Opes Partners. I'm your host, Stephen Knight.

• 0:12Speaker 01

  And I'm Andrew Nicole.

• 0:13Speaker 00

  And this is the show that helps Kiwis go from zero to five investment properties. So you could be financially free and stick around for the next 15 minutes because you're going to get a live demo where we create a wealth plan for a listener of the show. How much money she'll need to create her ideal money life? And what actually happens when you create a wealth plan with Opes Partners? And to join us to create this plan is Jenna. Jenna, welcome along to the show.

• 0:38Speaker 01

  Thank you for having me.

• 0:40Speaker 00

  And the reason this is so exciting is we've never brought somebody on the show and been like, let's create a wealth plan for you live, like a property investment plan, a financial plan and a bridged version, of course, because we're doing this in 15 minutes rather than the usual hour. And Jenna is the first person who's ever like, yeah, I'll come on and give you my numbers. Let's do it, guys. And it was wonderful meeting you at the Property Investors Conference over the weekend as well, Jenna. So Andrew, you're going to be building this. Where do you want to start?

• 1:08Speaker 01

  Yeah, this is really cool that you're coming on here just to talk so openly about your numbers. And today, what I want to do is I want to kind of build a bit of a draft plan and then, you know, you and I could refine it offline afterwards. And I've got a bit of information about you already. Whenever I'm thinking about kind of building a first wealth plan for people, there are two models that we typically use. We use the nest egg where you build up your wealth, you get to a date where you retire or you just stop working and then you sell everything, put the money in the bank and you spend that money till you die. Now, the problem is you don't know when you're going to die. And if you get that wrong, you'll either live too long and then run out of money. It's not good. Or you'll work too long and then you don't get to enjoy your money.

• 1:52Speaker 01

  And so that's not ideal either. Now, the golden goose, where you cash everything in, pay off any debt, reinvest that money and then live off the returns, you can live to a thousand. But the problem is you need more investment to be able to do that. So we always typically start with the nest egg and then we graduate into the golden goose over time. So I am going to start you there. How old are you at the moment? 31. So you're 31 at the moment. And look, for most people, we start with a plan that goes to 65. You might want to stop working a bit sooner than that or ease back. But if at the moment, you're going to rely on KiwiSaver and all super, I'd recommend we start with a plan that ends at 65. Does that sound about right to you?

• 2:35Speaker 01

  Yeah, I think I'd like to retire earlier, but we can definitely start at 65 if you'd like. Okay, well, why don't we start with 65 and then we can always go back and see how much we can move the dial. So if you go from 31 to 65 and then you live to, say, 90, and imagine now, we fast forward into the future, you're 65, you've just blown out the candles on your cake. What are you going to do? What's going to inspire you for the next 12 months? I'm definitely keen for a slower pace in life, you know, just waking up when I can, probably still be at like eight, instead of being 6.30, be a lot nicer. Definitely want to keep going to the coffee shop. Daily coffee and a walk is really important. Awesome. And just travelling and living life and catching up with people and having, you

• 3:18Speaker 01

  know, going out to nice restaurants, having people over for events, definitely very social lifestyle, probably more than an active, you know, going out into nature sort of lifestyle. And obviously this will change over time. So no plan made 30 years out from, from actually kicking into action is going to stay static for that entire time. But if you were to take a guess, how much do you think that lifestyle that you just described would actually cost in today's dollars every year or every week or every month, once you get to that date? At the moment, because I am solo, I would say probably a safer bit would be a 120 instead of just the standard 100,000. Okay, so $120,000 and that's what you're actually spending every single year in retirement.

• 4:01Speaker 01

  And look, to be honest, you might spend more at the start and less at the end, but we'll use that as an average of today's money. Now, I know that you've already got some investments that you're working on. So tell me about your KiwiSaver. How much have you got in KiwiSaver at the moment? Only 10,000 because I took it out for my first time. Yep, very common. And your salary at the moment is about 115,000. Have I got that right? Yes. And at the moment, do you put the three and a half percent in and get three and a half percent matched by your employer or more? That's correct, 3.5%. And do you know what type of fund you're in, like whether or not it's a conservative fund, an aggressive fund or not sure? It's considered high growth, but I don't know how aggressive that would actually be for KiwiSaver.

• 4:45Speaker 01

  Okay, so if we use an annual return after tax of five and a half percent, we can always go back and edit this afterwards, but that, that could be a good starting point. Okay, cool. So now that's added that into the plan. It's about, about $550,000 in the future. It's about 19% of the total wealth you're going to need, which is a great start. Now, you've got two investment properties, which I think is awesome. So you bought one as a rental property and you bought another as your home, but now it's rented out when you moved to a city. Is that right? That's correct, yes. Now, that's always an interesting one because if I put both of them as an investment properties, that's all well and good, but it assumes that when you get to retirement, you're going to sell both of those, pay off any residual debt and take the cash from it. But we haven't got somewhere for you to live.

• 5:30Speaker 01

  So what I probably recommend is we kind of carve out one of those properties, maybe the one that you were living in previously. And whilst that might not be your home in the future, when you do buy a home for yourself to live in, you use the equity in that property to fund your home. Now, there's obviously more things to consider like, you know, is your new home going to be more expensive and is there still debt on that property? But I think that's probably a good starting point. Does that make sense to you? Yes, it does. Yeah, I think it's a good plan. Cool. And so the rental property that we're going to keep as, as purely a rental property, what's the value of that? 360. Cool. And what's the debt on that at the moment? 280. Cool. And I'm not looking at the cash flow because that's, that's not what we're looking at when we're building a wealth plan.

• 6:13Speaker 01

  We're just looking at the equity and whereabouts is that property? Timor, Canterbury. So generally speaking, we would use a 5% capital growth rate, so long as it was a, a house or a townhouse in an area outside of Auckland. Are you comfortable with that being our projected growth rate? Yes, that's fine. And is the mortgage on that interest only or principal and interest? He and I. Cool. And what's the term, if you know? 30 years. Right. So 29 years. And so we'll say, we chipped away at that. And so the good news is by the time you get to retirement, that will be completely paid off and there'll, there'll be some cash flow from that property as well. So again, that's another consideration. But right now, just looking at what the equity would be at a 5% growth rate, if you continue

• 6:57Speaker 01

  to pay down that mortgage and we fast forward that, that gives you another 775,000, give or take, another 26.6% of the wealth that you need by the time you get to retirement. Now, with the government superannuation, right now, if you turn 65, as a single person qualifying for the government super, you will get at today's rate, $555 per week from the government towards your retirement. Whoops, now how many, how many years is it? 34 years, is that right? Must be. Yep. Yeah. So you don't get that as a lump sum, but basically that gives you the equivalent of another kind of 25.8% of the total amount of money that you, you need at retirement. Now, is there anything else that I'm missing at this stage?

• 7:42Speaker 01

  I've got a small amount in shares, but not much. Okay. With the shares, are you making regular contributions and/or do you ever take it out for other things? Regular contributions and not taking it out. Okay, great. So let's include that. What's the amount that you've got in shares at the moment? $2,000. And what are your contributions at the moment? Yearly or monthly? Whichever suits you. Let's say $150 a month. Cool. So $150 a month, $2,000 now. And do you know what your kind of average returns been recently? And what are you comfortable using as a forecast? And/or I can give you a guide, but with the disclosure, I don't give advice on shares. So it is just a, a best guess based on what we're talking about here.

• 8:26Speaker 01

  Most of the standard S and P is where most of the money is going. So probably just a standard forecast for shares, which I think is 6% and maybe some life. I think that's reasonable. So let's use 6% for now. And again, we can edit this over time. This is not a guarantee of future returns. This is just a prediction based on our best guess in this conversation. Now, if we add all of those things together and you continue exactly down the path and life follows exactly the spreadsheet numbers that we've put in here, you'll get to retirement and you'll be able to spend $89,000 a year, every single year until 90. And if you get to 90, time to start smoking, skydiving, heavy drinking.

• 9:09Speaker 01

  Now, one thing I just want to point out in your plan, and again, so much is going to change over the next 34 years. But one thing that, that often comes up in conversation when we're building a plan is the government's superannuation, that weekly amount. Now, the reason that comes up is because it's quite an expensive benefit that we offer people in New Zealand. And there's been lots of talk around whether or not it's sustainable at the current rates because we've got an aging population. Now, if the government were to say, yeah, it's getting a bit expensive for us, we either need to tax people more or we need to take some money from a different department. So maybe we take away from healthcare and education and all of a sudden we've got sick, dumb kids. They might, as an alternative, say, well, we're going to change who gets it.

• 9:53Speaker 01

  And so they might push out the age of eligibility to, you know, there was talk of 70. Or they might means test it. So if you've got your money, you use that first and then we'll kick in. Now, what that does is it invites a vulnerability to your plan that you might want to consider. So some people say, you know what, I want to rely on it because I don't want to create such a need for me to invest over the next 34 years that I don't enjoy today. That's completely reasonable and I'll just change it as time goes on if needed. Other people say, take it out. I don't want to rely on it. I don't want the government to say, you have to retire at 70 if you want to rely on that money. I want to be able to take control myself. Or you could go somewhere in between. Do you have a preference as to what you want to do?

• 10:36Speaker 01

  Because of how young I am, I'm a firm believer that by the time I reach retirement, it will either be gone or means tested. And I'm hoping I won't need to use that for means testing. So I'd rather just get rid of it. Yeah, I love that opinion myself as well, but everyone's different. And again, you don't want to create such a big wealth gap that you're. Peddle like hell for the next 34 years and then you get to retirement, you're too tired to actually enjoy your money. So I understand either way, but just wanted to raise that. So the big reveal, if again, life follows this spreadsheet perfectly, and it won't, and you continue to make your contributions at the current rates. Now KiwiSaver, obviously the contributions are going up in a couple of years. They'll probably go up further between now and then.

• 11:18Speaker 01

  But again, your plan should be a working document, not an absolute certain thing that you're going to stick to for 34 years and nothing's going to change. Your plan, now that we've removed that government superannuation amount, gets you to $58,000 a year of that goal of $120,000. Now, that's an awesome start. You should be proud of that, being so young and actually having a house that we've carved out for your own house, having some different asset classes and a rental property. That's awesome. But it's not going to reach your goal of $120,000 a year on its own. Now, the shortfall, and this, this is going to sound like a big number. So, so glad you're sitting down for this, is $1.5 million.

• 12:01Speaker 01

  Yep, that sounds not too bad. Couldn't be worse, could be better. I love the fact that you say not that bad because that just goes to show that you've probably run these kind of numbers before because often people see that number and it's quite confronting. And if it's the first time they've ever kind of sat down and worked through a plan like this, sometimes they go, that's too hard, see you later. I hope I die at 66. But it's awesome that you've got the attitude that actually, you know, that's somewhat achievable. Now, some people, property investment's not for them and that's absolutely fine. There's so many different ways to invest. If you were just to take it really safe and you were just to save yourself there, it's the same as saving $1,178 per week. Now, did you do that last week?

• 12:46Speaker 01

  Yeah, no, thank you. I would rather spend that money living my life. Well, I mean, the typical thing, even if you could scrape together and save that, I don't even think Ed saves that and he's a good saver, do you?

• 12:55Speaker 00

  I'm getting close, but, but not quite.

• 12:58Speaker 01

  So if, even if you saved that every single week, you're going to do that for 34 years. And again, then like, I mean, to be fair, if you saved that chunk of your income, you probably wouldn't need $120,000 a year because you'd be used to living on, on nothing. So that's where we're at at the moment. Now, obviously we have a absolute bias on the show because we talk about property. It's called the Property Academy Podcast. So I am going to show you the, an example of how much further towards your wealth goal adding in a property could take you. But again, for any listeners of this show, this is absolutely just an example where we've been unfortunate enough to have someone share their numbers. But I, I just want to give you an example of what you might do now. Your current rental property's in Timor. Where's your owner occupy property? Christchurch.

• 13:42Speaker 01

  Christchurch, okay. We've got Timor and Christchurch covered. Anyone that's been listening to the show recently knows I'm pretty excited about Auckland at the moment because it's, it's been so rough there. It's undervalued by about 10%. It's about as undervalued as it ever, ever has kind of got. I think that's where, if I were 31 years old and I could afford it and I was comfortable with what, what I was going to get there for my budget, that's probably where I'd go now. For me to actually know if that's right for you, we'd ask a whole lot more questions. It would take longer than the show, but I'm just going to show you an example. If we added in an example property and, and just kind of something entry level. So this might be on the lower end and you might want to spend a bit more to get a bit more in that property.

• 14:26Speaker 01

  Let's say that you bought a property for $700,000, which is a big jump from the current value of Timor, but having been to Timor recently, I mean, it's like going back in time. So let's say you bought a property for $700,000. I'll assume you use the no cash needed method. And so you take out a $700,000 mortgage. And I'm going to work on the basis that it's an interest only mortgage. Because at the moment, you've got some cash flow commitments to your shares. You've got some cash flow commitments to life and your KiwiSaver. And you're paying principal on your other rental property. So I'd probably think that cash flow would be important to manage. And so I'd say interest only would be likely recommended by your mortgage broker. But let's just use that as a placeholder.

• 15:10Speaker 01

  If you pay down principal over the next 34 years, then that gives you even more wealth at retirement. But if we apply those numbers in a 6% capital growth rate, because Auckland tends to go up at a higher rate than other parts of the country, and you hold that property, you never pay a cent of principal off. Oh, wow. I wish I'd got that, that, oh, wow.

• 15:29Speaker 00

  We got the, oh, wow. You should stop talking and say, what did you mean by that?

• 15:33Speaker 01

  Sorry. Now, when you say, oh, wow, I was talking over you. What was oh, wow for? Oh, I was, I was surprised that it just looks like it's just going to be one that closed that faster than I was expecting it to. Yeah. So because a few things are happening here. We're talking about a higher value asset in what you've got at the moment in terms of rental. We're talking about a higher growth rate. Now, again, we're using a bunch of assumptions here. So we, we need to kind of tinker with things a bit. But that one property not only closes your wealth gap if those numbers are correct that we're forecasting on, but it gets you above that goal line. Now that gives you a bit of flexibility because now what we can do is think, okay, do we retire richer? Do we retire sooner?

• 16:16Speaker 01

  Or do we kind of work a combination of the two things? Or, or do we just have a bit of fat in our model so that if the market doesn't perform as perfectly as we're modeling out, we still get, you know, within kui of our goal? That gets you from the $50,000 a year to over $130,000 a year with just that one extra property.

• 16:36Speaker 00

  Does that surprise you, Jenna?

• 16:37Speaker 01

  Uh, yeah, it does. I wasn't expecting it to be quite that easy. But I think that just shows you I have time on my side and that's the power of starting early. Yeah. And actually just on that comment about time on your side, one thing I would probably just, just make an assumption of today, that might not be necessarily affordable because you've got a few things on your plate. So one thing that we can do in our software is we can say, well, what if we don't do that today? How much time have we got to still hit our goal? So if I said, let's give ourselves five years, just, just a stab in the dark. And we bought that same value property in five years' time. I know that's not going to happen because the market's likely to go. But if we do, and all the same rules apply,

• 17:18Speaker 01

  it doesn't quite get us to the goal, but it gets us to $114,000 a year. So now we might be able to make something work from an affordability standpoint. And you might do it much sooner than five years and it might cost a bit more. And so then you've got another higher value asset going up in the future. But what this means is we can start to think about, if that's what your goal is, to buy a property in Auckland in the next five years, how do we work with your mortgage broker to be able to make that work? Now, if over the next five years, you meet a lovely person and you move over to Australia and no longer Auckland is, is on your horizon, that's okay. Just because it's in your wealth plan, doesn't mean you have to do it. But that at least gives you something to work towards.

• 18:01Speaker 01

  And I'm all for people knowing what they want to do in the future and what they need to do to get there, rather than in five years' time, you come in and say, right, I'd like to buy a property in Auckland. And I say, well, actually the Auckland market's too expensive now and you can't afford it. And we, we haven't done anything to actually get there. So again, like a plan is only as perfect as how you execute it and how the market performs. And we can do things to make sure that there's some kind of fat in your model so that, that if, if we don't miss the mark, we get close to it. But I think that's an awesome demonstration of how, just with a bit of consideration, because you've got time and using some consideration of how you approach this, you can achieve your goals pretty easily. Yeah, no, that's awesome news. It's definitely quite good to see.

• 18:44Speaker 00

  And look, we'll let you guys go offline as well to finalize that, go through a proper process. But I suppose the purpose of the episode is I'm a big believer that every New Zealander should have a financial plan. Every New Zealander should have an idea and some goals of where they're going, what they want to achieve out of life and how they're going to make that happen. And the truth of the matter is, working with a financial advisor, whether it's somebody at Opes Partners or somewhere else, is not as scary as you might think. It comes down to a conversation of what have you got going on in your life? What do you want to achieve? Let's run some numbers, see where you're going to go, put it all together. Because often calculators online don't let you do all of the things

• 19:29Speaker 00

  that you might have going on in your life. And in usually not 20 minutes, but usually within an hour, you'll be able to walk away with a plan for what you might decide to do next. And if you want to get a similar oh, wow moment like Jenna had, then you might like to book a wealth plan with our team at Opes Partners to use the same software that Jenna's just used. If you're into that, I'll drop a link down in the show notes. You can tap on that or just go to the Opes Partners website, click the big orange button and choose a time. Doesn't cost you to book that, meaning doesn't cost you to get that plan. And over the last 15 minutes, you've seen the live demo where we create a wealth plan for a listener on the show, how much money she'll need to create her ideal money life

• 20:12Speaker 00

  and what actually happens when you create a wealth plan with Opes Partners. Right, let's wrap it up there, but please don't forget to write a review and subscribe to the podcast. Really does help us get the message out to more people.

• 20:27Speaker 00

  Thanks for listening to the Property Academy Podcast. I'm your host, Steve Attnight.

• 20:30Speaker 01

  And I'm Andrew Nicoll.

• 20:31Speaker 00

  We're going to be back again tomorrow with even more daily strategies, tactics and insights to help you get the most out of the New Zealand property market. Until next time.