How to calculate retirement date when using other investment types


I am not sure about how to calculate when i would be ready to retire when using investments that are not Stocks.
I know the 4% rule was designed for use when you have Bonds and Stocks but what if the majority of my investments are in property (Australian property)? How do i know when i have enough to retire?

I currently have a property in Sydney and it is rented out, the rent covers the loan repayments plus maintenance costs. The capital has grown considerably and my loan is less than half of the property.

While i still have a mortgage the passive income (from rent collected) is not enough to live off alone. Once the property is paid off (Estimated 6-7 years) i will be putting all savings into shares.

Does anyone have any example cases or are in the same situation?

Kind regards,
Mr Pineapple.


Yes! My retirement plans lean heavily on passive income from rental properties. You can use the same spreadsheets as you would for a plan that includes a larger draw down of savings over time. You still need to determine what your monthly or annual cash requirements are during retirement. Just subtract the passive income you expect to get the new monthly/annual draw down amounts. For instance, if you’ll need $40k/yr and you have $20k/yr in passive income, your target for income from non-cash flowing investments will be $20k/yr. Assuming a 4% draw down, where (x * .04 = $20,000), you’ll need around $500k to accomdate the additional $20k needed above your passive income. You calculate when to retire based on when you hit this new, lower number.

One thing that’s harder to account for is vacancies, major repairs, and unlikely but devastating problems. You should be saving a percentage of your cash flow specifically for vacancies and repairs and not include this portion of cash flow in your passive income calculations. But, what happens if something goes really wrong? Maybe someone slips and breaks a leg and you end up being sued. Ensure you subtract any insurance costs against your cash flow, as well. If your passive income is not lowered to account for these expenses, you could encounter problems when you need to put a new roof on your rental or aren’t able to rent it out for 6 months.


If you plan on living in the house you can’t do the 4% rule, unless housing prices were surging and you were taking out loans all the time matching your equity or something. As for renting, @NatPhorU has it pretty much covered.


Yields on property vary greatly, especially when you either do the management and maintenance work yourself or you hire a property manager and tradies.

You also need to consider updates of property due to wear and tear etc… so this is another cost consideration to factor into projecting future yields.

Currently I believe Syd property yields are 2.5% albeit everyone’s property will be different due to rent,management costs and property valuations.

The other consideration is that property is not a volatile as the share markets. Maybe this along with low interest rates has made residential property the choice of investment vehicles post GFC (in addition to the tax deductability).

Bottom line regardless of what and where you invest the formula for Financial Independence remains the same universally i.e. When your investment earnings, less expenses are more than your living expenses, you are in a position of financial choice. You can choose to cease working for a pay cheque and follow your passion, knowing your investment income will sustain your lifestyle expenses.


Thanks for the reply NatPhorU, When you say you need $500k, you mean, in an alternative investment?


Peter, thanks. Sounds good to me. I will focus on the passive income income and growing this.


$500k was meant as an example for the savings you would need if you wanted a 4% draw down to equal $20k/year in income, and $20k/year was also an example. Start with your magic number.

Assuming we use 4% and need $20k/year above your rental income, I backed into the $500k number using the formula x * .04 = $20,000, where x is the amount you need to have saved in order for a 4% draw down to equal $20k. Divide both sides by .04 and you get x = $500k.

To find your total savings, you’ll need to determine how much you need in retirement, offset that by your rental income, then divide whatever number you’re left with by .04. Let’s say you actually need $80k/yr in retirement and your rental provides $10k/yr, leaving you with $70k/yr you’ll need to fund from savings. Assuming 4%/yr draw down, $70k/.04 = $1.75M.

Anyway, these are just examples, but will give you a good idea of how to find the savings number when accounting for income outside of savings.


Hi NatPhorU,

Thanks for the explanation. I am aware of the 4% draw down. but what i am not clear on is if this can include the capital of your property.

Here is an example case study to highlight the question i am struggling with.

Bob has a house worth $600k
His loan is $100K

This makes his networth $500k
Rental income $10k/pa (enough to cover the loan and some capital)
He needs 20k to live on for retirement. He already has 10k/pa from the rental income and he has $500k capital in the property.

Theoretically that would be $30k passive income (Minus the loan repayments @5% $5000pa) = $25k theoretical income.

The question is, when would he be ready to retire?

I think i may have answered my own question by writing this out in a different way… He would be best to pay off the $100k loan in full then all additional cash should go towards shares or other investments. ?



I see. I completely misunderstood. Thank you for the clarification.

For retirement purposes, it is my opinion (and I want to stress the opinion part), that you cannot include the equity in a rental as part of your retirement savings. The reason is that, without either selling or taking out a loan against that equity, you cannot use the equity to draw 4% from each year. In order for that equity to actually provide any value, you would need to use a reverse mortgage, take out a home equity loan, refinance, or sell the house. Selling the house would mean that you don’t have any rental income, and any of the loan options would likely offset most of the rental income.

IMO, using your case study, Bob has either $10k/yr in passive income from a rental, or Bob has $500k in retirement savings from selling the rental, but I do not see how Bob would have both. However, if Bob needs $20k/yr to live on and expects to use a 4% withdrawal rate, then by selling the rental and netting $500k, Bob will be able to meet the $20k/yr requirement.


@Pineapples based on Bob requiring $20kpa to live in and a (after pay out loans) he has net $500k. Bob could retire if his income is 4% on $500k i.e = $20k.
Does Bob have a place to live without additional expenses? $20k he may have enough to fund basic needs but is he going to have quality of life.
Consider average wage in Australia is $50k+ pa and those living in poverty are identified as disposable income of less than $400 a week for a single adult. By my cal’s Bob would be classified as living in poverty.
Just saying…


Hi Peter,

It was just an example figure to explain the maths. Although, I am comfortably living on a budget of $270 a week at the moment (excluding some project costs).



Any form of “safe withdrawal rate” can’t really apply to directly owned property (or any asset class where fractional ownership isn’t an option).

If you think about it you can’t realistically sell 4% (or whatever) each year of your ownership. Setting borrowings aside for a second, you either own it or you don’t.

That leaves you with four options.

  1. Keep the asset(s) and live off the passive income they throw off. In theory this is a perpetual passive income generating machine, little risk you’ll outlive your assets.

  2. Sell the asset(s) entirely, invest the proceeds in another asset class that you can realistically apply a “safe withdrawal rate” approach to… shares, bonds, term deposits, peer-to-peer lending, whatever. Now you’ve got some risk (possibly a significant one) of out living your assets, but for what it is worth FIRE community dogma says you’ll likely die before you run out of money.

  3. Borrow against the asset, for example setting up a line of credit secured by the property. Draw down the “safe withdrawal rate” amount each year, use the passive income it generates to (hopefully) cover the borrowing costs. This one is a game of chicken with mortality, you hope you die before your borrowings exceed the maximum LTV on the property.

  4. Look at setting up the equivalent of a French viager arrangement, essentially an equity release annuity. Not so common in Australia, the buyer is essentially betting the property owner will die sooner rather than later. They lose out big style if this proves not to be the case!


Hi Slow_Dad,

Thank you for putting things in to perspective. This answered the questions i had. Option 1 is by far the smartest option in this situation.

Thanks everyone for their input.

Kind regards,