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#327 - The Hack To Retire at 55 · Money Grows on Trees

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  The average Australian retires at 67 with $400,000 in
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  super. That's barely enough to last 10 years, let alone fund the life
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  you actually want. But there's a small group of Australians who
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  do retire at 55, not just comfortably, but
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  with income-reducing assets that continue to pay them every single
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  month. My name is Lloyd J. Ross, seven-figure investor and entrepreneur, and I've helped thousands
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  of everyday Aussies get out of debt and build real wealth. And in this
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  video, I'm going to show you exactly what those assets are,
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  how to build them, and the one thing you need to do right now to retire
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  12 years before everybody else. Before
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  we do that, let's look at the problem with superannuation. I'll
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  be blunt. Superannuation definitely is the most tax-advantaged wealth-building vehicle
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  most Australians will have access to, for sure, right? The contributions are
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  taxed at 15%, meaning you get a tax deduction when you add money to
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  it to a certain amount, roughly about 25k a year. And
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  then the actual investment earnings are taxed at a lower amount. In
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  fact, half of the typical amount, any income. And then for
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  tax, the capital gains are tax-free, right? So
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  the government's handed everyone a compounding machine with a massive
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  tax discount. That's effectively what superannuation is. If you want
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  to learn more about super, go back and watch one of the episodes I did specifically on superannuation.
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  But here's the problem. Super is not a
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  retirement vehicle for a person who wants to retire at 55 because
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  the preservation age for anyone born after July 1964 is 60 which
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  means you cannot touch it before then without severe penalties
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  and There's hardship conditions. You're gonna meet etc. So
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  super is slow and it's locked up and controlled by
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  government rules. So if your entire strategy is built around your
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  super balance, you're going to mathematically guarantee that you'll be
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  working until after 60. So if you want to retire
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  before 55, you need a completely different strategy.
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  So here are the three assets that you need
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  to build to be able to retire at 55, okay?
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  Now if you're younger and you're watching this, kudos, that's amazing. You
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  have a huge advantage of time, all right? But bear with
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  me as I go through these strategies because it does apply to everyone and
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  anyone. And then I'm gonna explain to you an example and then go
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  to give you a bit of an indication of how I treat retirement. So
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  three assets you need to build. So to execute this strategy, you need to
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  focus on three specific types of assets outside the super. When
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  you retire and you get, say, $400,000 in super, or whatever it might be, that's great.
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  And you may be more than that. And that's a lump sum of asset that
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  needs to be invested accordingly as well. So is part of it. But
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  to execute this strategy, you do want to focus outside super as
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  well. And what you'd want to be doing is, you want to be building a
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  share portfolio in a taxable account. In some sort
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  of index fund, or you can buy individual shares, you have to
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  know what you're doing. But you want to buy it in some sort of index fund. And you want
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  to start as early as you can. And even if you started at mid-30s,
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  for 20 years, you can compound up to a million bucks. You
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  can, especially if you're starting with a reasonable lump sum instead of buying other
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  things. It's totally possible to do. But
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  most people just don't take the step because they wait too long. So for
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  example, they'll, at 35 or whatever it might be, they go, oh, I've got
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  ages. I'll wait till I'm 50 to start worrying about my retirement. And that's
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  the real problem. You can't wait till you're 55. to
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  want to retire at 55. But I do see a lot, like, I'm 55, I want to retire
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  now, what do I do? I'm like, that was a conversation you should have with yourself at 35. The
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  simplest thing to do is in your 30s,
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  or like, it just doesn't, just do it. It doesn't matter what
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  age, it just means go and start, is to build a
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  share portfolio in a taxable account, outside super. So you've got kind of
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  two running together, right? The next one, this is
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  a very important one to amplify your ability to make
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  income and I would say that almost all of the people I know who have retired
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  at 55 in some form or another have had
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  a business, right? A business with real cash flow. Not
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  just a little side hustle where you're selling macaroons at the local market. It's like something
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  that can really generate cash flow, yeah? Whether
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  it's a traditional type of business or whether it's an online business, a
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  well-run business can return 20, 30 or 40% on invested capital, right?
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  It can produce substantial returns but most importantly, it gives you
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  a lot of flexibility. Flexibility to amplify your income, flexibility
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  to step out of jobs you don't like, flexibility to skill up, flexibility
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  to add income streams and to deploy that cash how you feel fit,
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  right? And potentially work from home, drop some costs like what I do. So
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  a business is a wealth building
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  machine in the sense that it really amplifies your
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  income. And if you look at the wealthiest people in the world and those that did
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  retire at 55 and have, it's business that generates that without
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  a doubt. Like it's such an integral
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  part of the wealth building process. And I think when I
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  say business, people get a bit scared because we have, we have
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  been conditioned. by
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  whoever, banks to limit exposure and risk, whatever it is, to think
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  that all business purely is risky. Because, you know, someone like Tony Robbins goes, well,
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  you know that 80% of businesses fell in the first five years. It's
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  not that they failed. For most businesses, if
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  you really work hard on them, you're not going to fail on them. Like, you'd
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  be shocked and surprised to how many flipping half kind
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  of like, semi-retarded people make
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  money in businesses. You can do it. It's not overly risky,
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  it just carries a bit more risk. But so does employment, by the way. Who's
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  to say you can't get chopped at your work? Like, that's risky,
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  but they never talk about that risk, do they? Because it doesn't serve the narrative. If I
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  think about my grandparents, give you an example here. Now,
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  they didn't retire at 55, but I do believe they retired at
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  early 60s. And so it's not too far off the mark.
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  But here's an example. didn't come from any money, poor,
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  you know, gone into bankruptcy a couple of times, or once, certainly, but
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  they, in their 40s, they bought their first country pub, okay? And
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  the person they wanted to buy it off said they didn't have the capacity to run it and blah, blah, blah. But my grandfather
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  said, I'm going to do it anyway. And so they ended up buying a pub. And
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  actually, the first six months of my life, I spent in this pub. And
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  it's actually in a place called Atunga, New South Wales, the Atunga Pub. I
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  lived for the first six months of my life in there, because my dad was building another house, and
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  we just stayed there. And then they bought another one and another one. Anyway,
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  they went back into some farming that had some challenging seasons, sheep farming, and
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  they sold that sheep farm and they went back and thought, you know what, let's stick to our knitting
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  and we'll go back into a pub. Now, in their 50s,
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  just to give you the indication, my grandmother, she's 91. She told
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  me this story the other day when I was visiting her. She said you know when
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  we're in our early 50s. We took a $400,000 loan this
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  isn't like 1991 or 1990 think about that a
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  $400,000 loan in 1990 that's like equivalent to probably like one and a half
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  million or two million like it's a lot and in
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  their early fifties and they bought a country pub in Baraboo, New
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  South Wales for that price and they did it up and they ran it and
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  they built up the equity and it generated income that paid off the debt and
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  they ended up selling that and buying two additional pubs with free cash flow that
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  funded their retirement and both of them retired in their sixties until
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  what? God, my grandmother's now is 91. What's that, 30 years
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  or certainly 20, good 25 years and So
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  they swung at a business, like you can see, like even
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  though they did it with debt, it's the business that can generate income, right? So
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  of course, you're going to have super, of course, you're going to have some shares in a taxable account, definitely,
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  but don't turn your nose up at a business, okay? Just quickly, if you're ready
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  to take control of your finances but feel stuck on where to start, I
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  have a solution. My book, Money Bias Happiness, simplifies
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  investing and wealth building with practical steps to help you achieve financial
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  peace. Get your copy via the link in the show notes and let's get your
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  money working for you. Now, back to the episode. And the third one
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  is, of course, and people have done it a lot, is of course a property investment. Yeah,
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  particularly over the last, God, 20 and 30 years, we've had the greatest
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  bull running property ever in Australia and many other Western
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  markets, right? Because it produces cash flow. So
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  long as you don't form the trap of accumulating so
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  many of them that you're not carrying any equity, you're
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  carrying just debt. So when you turn 55, you're like, oh, I've got 10 properties, but
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  you're not producing any cash flow because all the money's going to debt repayment. And you've got maybe, I
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  don't know, 25% of that is equity. Then you've got to sell them
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  all. but do it within reason. The ones that I've seen
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  that effectively over time paid off a mortgage because they bought in
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  the 80s and 90s when it was three times annual income, they stayed
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  in it. They then used some equity and paid off a property at
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  a time. But they did it in a way that generated free
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  cash flow. And I think if you look at property investing of
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  yonder year, it was better when it was free cash flow. And Sharon Lecter, who's the
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  co-author of Rich Dad, Poor Dad, the greatest personal
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  finance book in history, Her and Robert Kiyosaki wrote that
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  book in the early 90s, and she came on the podcast. I go back
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  and listen to the show with myself and Sharon, and she told me that Robert
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  Kiyosaki built the cash flow board game because he found out a way in
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  the late 80s, early 90s to buy enough property to generate
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  100 grand a year in free cash flow and income. That's why he built the game cash
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  flow. That's why it's heavily into property. They
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  wrote the book, Rich Dad, Poor Dad, as a brochure to sell the
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  board game, if you didn't know. And what's interesting about
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  that is that worked back then because you could enter very, very
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  cash flowing property, but you can't do that
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  now. You can do it in some respects, but not as easy because it's
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  like three times more expensive against incomes. So this
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  type of strategy must change. And that's why, you know, it's probably more
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  astute to go business and shares than it is property. because
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  it is cumbersome on capital to acquire property right now.
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  So I think of these three options, the first two are the most effective to
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  retire at 55. Here's the reality. People
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  want to retire at 55, and they have this vision in their mind
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  that, oh, I can see myself at 55, I'm sitting on a beach. I'm at
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  a beach somewhere. Fine. Not working, because you don't want to
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  really be in that shitty job you don't like. You don't want to be there. I totally get
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  that. So you have this vision, I want to retire. But
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  here's what happens. They haven't done any of the groundwork. educate
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  themselves in shares. They haven't put
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  money away. They haven't even started a business. They have no courage to
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  start a business. They haven't bothered to delve into it. They don't like work. There's
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  just been no groundwork for that. So
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  it's where the expectations are here, but the reality of
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  what you're doing to meet that expectation is down here. So there's this huge
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  gap. And I really do think people are moving towards a mirage.
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  It's just not real. You can say that all
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  you want to retire at 55, but the truth of the matter is, you're taking no
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  steps to get there. So it's just like
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  a mental masturbation. It's a fantasy. And
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  I see it a lot. There's so many people who are coming into
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  this age, their super's not going to save them, and they're just like, oh,
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  now can I retire? You know, the
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  numbers are to retire, I would say comfortably and do things
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  you want to do. You probably want to be making at least 150K a year income,
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  but let's call it 200 because inflation. So say 200, really
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  to have a really good one, right? Now, again, you may argue against that, but if
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  it's 200 divided by 0.05, it's $10 million at
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  a 5% dividend rate or interest rate
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  on that to give you passive income that doesn't affect the capital. $10,000,000. Do
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  you have $10,000,000? Do you have half a million? Do
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  you have a million? There's a disconnect. There's a disconnect. And
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  you might be thinking, flip neck Lloyd, like I'm watching this and I'm 50 and you're telling me
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  I can retire at 55. And yes, I can see the disconnect now. Thank you very much. Like
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  that sucks. What do I do? Here's the answer. Here's
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  the answer. Forget about retiring. Retirement
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  is this narrative that banks create to sell mortgages and
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  old people's homes. It's
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  almost like a senior rite of passage to retire. I don't know
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  if it's a good thing. And I think when people say they want to retire, what
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  they're really saying is, I don't like my job. I don't like the people I
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  work with. I don't like the commute. So
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  they're running away from the pain. I get that. But that doesn't mean
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  you've got to retire because I have also seen people do that,
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  leave those things with enough money, by the way, to do it, and
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  then die a few years later because they have no purpose. They have no structure.
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  What's interesting about this too, my mom's retired. She has a house paid off. She
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  has about 1.5 mil shares. She does
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  okay. It's
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  the type of retirement you want to create for yourself, okay? So,
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  I would say the gauge rod between someone who just wants to retire and
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  never work would be the minimum would be house paid
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  off and one to two million dollars in a portfolio that produces passive
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  income and keep your costs low, right? So, it's not
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  like European cruises every five minutes. That's a real scenario. That
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  is achievable for most people if you lay the groundwork. But if you're kind
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  of aging, you have not laid the groundwork, then
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  I think this part is really important for you to understand. If you can delete
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  that word retirement from your vocabulary, I think you'll just live a
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  better life because you'll go, okay, well, if I can't retire, what
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  can I do for the next 20 years of my life where I will work, but
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  I can do it in a way to work in an area I want to work with, work with people I
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  admire and want to work with, and in a way that doesn't burn me out in my health.
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  Generally speaking, you'll find a business that enables you to do that because not all
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  businesses are about doing 60-hour weeks. Some businesses
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  can just let you find rhythm and work with yourself. You
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  can, but you're not going to do it if you've got this notion in your head you
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  must retire at 55 or 65. You're better off to say, if
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  I was not going to retire today, What would I have to do to be able to work
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  for the next 20 years with some joy? And that's a better question
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  to ask and a better conversation. And while you're doing that, one
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  of the other things that will happen to you is you may meet, if you're someone who's single, you may meet
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  a partner who can join that mission. And all of a sudden, you know, two forces
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  are greater than one and you can come together, right? But I
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  think you're doing yourself a disservice if you haven't laid the groundwork for
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  retiring at 55 or 60, right? Expecting to
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  and then putting in your own mind that you must. That's
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  just, it's just going to wreck you mentally. So I
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  would say cancel the word retirement from your vocab and
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  find a way you can continue to work and build wealth sensibly over
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  time to do that. And by the time you get to
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  75, then you will probably be in a position where you can. And so I would say don't
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  delay. Start doing what you do now if you had to work for the rest
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  of your life. You won't want to retire. I don't think my
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  dad will ever retire. I don't think I'll retire. And
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  do what? What am I gonna do? Go
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  on a cruise for two weeks, sit on the beaches, you'll find that's not the answer either, right? So,
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  each to one's own, but I hope you understand now that there's
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  a foundation must be laid for 55, and then the options on the table,
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  and there must be then a solution created in your mind as to what
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  you're going to do if you haven't laid the foundations. Both work. You
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  choose which one you're going to adopt. And I'd love to know in the comments, what did you take away the
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  most from this episode? hit the subscribe button, send this to a friend
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  or someone who needs to hear it. There are two options to go with here. You choose
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  yours, but we have to cast them in reality. And
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  that's what I'm all about, is the reality of financial education and realness
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  when it comes to numbers and what's going to be real and achievable for you. See you
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  in the next episode. Thanks for listening to Money Grows on Trees. If you enjoyed the
• 15:55
  episode, leave a five-star review on Apple Podcasts and Spotify and
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  subscribe to us on YouTube so you never miss an episode. And
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  if you're serious about building wealth, make sure to check out the links in the show
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  notes and follow me on all social media platforms at