I understand I am in desirable position but have no idea what financial direction to head in order to set myself up for the future? In summary – I don’t want to work for the rest of my life and want to retire early!
Currently on double income (155kpa + 90kpa) living in our primary residence valued at 500k. No other debt, investments or kids.
Mortgage is variable interest only, with 100% offset account.
Property value = $500k. Loan remaining = $425k. Offset Account = $200k.
Offset Account is constantly growing from our savings and at the current rate I predict the offset account will be equal to the loan remaining amount in around 2 to 3 years.
Looking for some advice on the next step financially?
The real kicker in this scenario is that my partner and I are both 26years old.
Have a read here: http://www.mrmoneymustache.com/2012/01/13/the-shockingly-sim…
The blog post refers to the 4% rule. This may not be so conservative for a very early retiree (saving 25x expenses) so maybe add a buffer (e.g. aim for 30x or 33x expenses). If you can figure out the lifestyle you're aiming for that gives you something to work towards. And keep in mind the mortgage will be paid off by then.
For example, if you are happy living off $30,000 p.a. then $1m is about right (at that level taxes on dividends will actual be negative and taxes on capital gains will be very low), for $50,000 p.a. about $1.5m is a reasonable estimate to aim for (these figures should be adjusted for inflation as prices increase, e.g. in 10 years time that $30,000 cost of living might be $40,000 and so the $1m more like $1.2m).
A couple of other thoughts:
-Your home lowers your cost of living but is not an investment. Keeping it small means a lower cost of living. Paying it off is a risk-free after-tax return for the next few years so is hard to beat.
-Salary sacrifice into Super may still be worthwhile, particularly once the mortgage is paid off. After-tax contributions I agree may not be worthwhile at this stage due to risks of legislative change, salary sacrifice lowers your tax bill and is 'free money' if you plan to live that long, particularly on your relatively high marginal tax rate. You will still need a large chunk outside super for early retirement.
For investment approaches I'd read a book by William Bernstein, e.g. http://www.bookdepository.com/Investors-Manifesto-William-Be…
It's a bit US-centric in specific suggestions (e.g. 401k rather than Superannuation, and the exact funds/ETFs available here will be different) but it will give you a valuable framework for thinking about investing.
There are some freebies out there which are good if you want to dip your toe in without expense (Bernstein is a good writer but all the basics are available online), e.g.:
http://investingroadmap.wordpress.com/
http://investorsolutions.com/media/books/investment-strategi…
http://www.rickferri.com/books-by-rick-ferri/serious-money-s…