Accelerate your Retirement Plans!
Financial Advice

Accelerate your Retirement Plans!

The recent volatility in the local and overseas share markets has created angst for investors, especially those between 50 to 60, or those already retired and living off their investments. On top of this cash interest rates are below 1.0% and tipped to go lower. So what to do and where to invest?. In, this article our wealth creation team provides insights and a strategy to increase your returns allowing you to accelerate your retirement plans!

For investors in equities, or considering purchasing equities, the current environment of massive market swings is creating much angst. What is ahead of us? Do we head to the safety of property, cash or even gold? Share market timing is hard.

How are you viewing the recent share market collapse? Panic. Ignore. Hope. or OPPORTUNITY!

Many of you aged between 50 and 60 have built up a sizeable amount of equity in your home, or are directing surplus cash onto your mortgage. In times of uncertainty this is a safe and risk-free investment decision.

Current interest rates are at record lows, with the loan rates ranging from 2.8%-3.4%. Given the current economic climate, many experts are predicting interest rates will continue to fall. Therefore, having your surplus money in cash earning less than 0.25% is not a recommended option. If you direct these funds into your home loan, you’ll get a ‘guaranteed’ return via the interest savings.

Is this investment decision necessarily the correct one? Especially in the current low interest rate environment we live in.

Let’s assume you have done a fantastic job and have paid off your home loan. Your disciplined approach has seen you put most of your spare cash into the mortgage, so you do not have masses of money sitting in the bank, with some tucked away for a rainy day.

What if you could use your home equity to take advantage of the recent share-market correction?

Who would it suit?

  • Married couple, or single aged between 50 to 55.
  • Retirement age 65.
  • Appetite for growth assets & borrowing to invest.
  • $200,000 equity in your home available to redraw.
  • Cash savings of $50,000.
Financial assumptions:

  • 10-year investment term.
  • Redraw $125,000 to invest into the share-market.
  • Contribute $25,000 of personal funds. Keeping the other $25,000 for emergencies.
  • Total investable funds are $150,000.
  • Invest in the top 200 companies listed on the ASX.
  • Earnings rate is an average of 8% pa over the 10-year period (including dividends and excluding. franking credits)
  • Home loan interest rate of 4% over the 10 years.
  • Loan redraw paid back in 10 years.
  • Tax deductibility of redraw interest not considered for this calculation (at this stage)
So how do the numbers look….

If you implemented the above strategy, based on the above financial assumptions, your $150,000 investment after 10 years would grow to approximately $324,000.

The amount of principal and interest repayments made over the 10- year term would be approximately $152,000, with $26,900 of this being interest. This strategy provides a net return of $172,000.

There are things that could go wrong with this strategy, some may eventuate, some may not. Importantly, we believe if you take the following into consideration you will have a large margin of safety on your side.

  • Only accessing part of your home equity.
  • Using conservative return estimates.
  • A higher rate of interest on your loan.
  • Not taking into consideration the tax deductibility of the loan.
Other things to consider…

This is a borrowing strategy so your loan can help speed up your growth to help fund your retirement plans, or net wealth. However, borrowings can also magnify your losses. Borrowing to invest into any asset class has risks and costs. You need to speak to a professional to determine if a borrowing strategy is suitable for you.

One area your adviser will discuss with you is the ‘sleep test’. For example, will this strategy keep you up at night? If the answer is yes, then an alternative strategy plan for your retirement is in order.

Finally, although interest rates are at historic lows, they may well rise again. A return to historical home loan rates would change the picture.

Stay tuned for our next article, where we will look at supercharging this strategy by adding superannuation into the mix.

If you would like to consider your specific circumstances and strategies, then contact MB+M for a discussion with one of our team of OzPlan Financial Services licensed financial advisors.

Our licenced advisers can provide investors personal advice on the construction of a suitable direct share portfolio, or help with executing buying or selling shares on their behalf.

We live by our promise of “making your life easier…’ and would endeavour to do that for you. Call 03 58311233 “

MB+M- OZPlan Wealth Creation Team


This publication has been compiled by OzPlan Financial Services, ABN 35 005 391 202 AFSL 221235 and is current as at time of preparation, April 2020.

Material contained in this publication is an overview or summary only and it should not be considered a comprehensive statement on any matter nor relied upon as such. The information and any advice in this publication do not take into account your personal objectives, financial situation or needs and so you should consider its appropriateness having regard to these factors before acting on it.

This publication may contain material provided directly by third parties and is given in good faith and has been derived from sources believed to be reliable but has not been independently verified.

To the maximum extent permitted by law: no guarantee, representation or warranty is given that any information or advice in this publication is complete, accurate, up-to-date or fit for any purpose.

It is important that your personal circumstances are taken into account before making any financial decision and we recommend you seek detailed and specific advice from a suitably qualified adviser before acting on any information or advice in this publication.

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