Retirement planning

[Deep Blue]

To some extent, I think buying and relying on a rental property (even more than one) is like buying a single stock (or a few).

I have invested in housing as a landlord for the past twenty-five years, in multiple countries and since I got married, in my wifes name too. I basically regret it, I should have just saved into equities the whole time. While you can of course borrow easily against property, the after tax net returns have been far inferior to investing in a simple index tracker fund. I don't plan on selling what we have, as it does produce an income stream in GBP and we don't have any mortgage debt but I think it is very unlikely we would build up more of a portfolio.

Just on the hassle factor, even though we employ agents for all the properties there are always new tenants, problems, damages, maintenance, changing landlord regulations and of course taxes to deal with. Multiple by the number of properties and it's a sigfinicant time sink compared to simply owning an index tracker.

[Tkydon]

15 Year Range (back to Oct 2009)
Min 117.55
Max 207.94
Current 194.96
Median 162.745
(207.94 - 117.55)/2 + 117.55 = 162.745

34.5 Year Range (back to Jan 1990)
Min 117.55
Max 286.21
Current 194.96 @ 45.90%
Median 201.88
(286.21 - 117.55)/2 + 117.55 = 201.88

[northSaver]

I think I'll run the numbers again on our apartment block. The last time I did it the average net yield was much better than a REIT and similar to a global stock fund's CAGR. But yes, I agree about the hassle even when using a managing agent. We won't be buying another one.

On the plus side, it's fairly steady monthly income in JPY and isn't generally affected by stock market crashes. It's also an inflation hedge in theory (in practice you have to make sure the other owners are raising their rents too otherwise you'll suffer some vacancies). Pros and cons.

We aren't married to it though and may well decide to sell it and buy stocks. I appreciate the input from everyone.

[northSaver]

That is not the median, Tkydon. It's not even the mean. It's just the middle of the range! (I can't think of a better term for it). Take a look at this:
https://www.investopedia.com/terms/m/median.asp

[Deep Blue]

I think I'll run the numbers again on our apartment block. The last time I did it the average net yield was much better than a REIT and similar to a global stock fund's CAGR. But yes, I agree about the hassle even when using a managing agent. We won't be buying another one.

If the net yield is 7%+ I suspect the capital value is falling or will fall over the long term.

[Moneymatters]

One article suggested that we should have a cash bucket of up to five years living expenses. Or, more accurately, living expenses minus income (since we'll hopefully all get some kind of pension income in retirement). This sounds like overkill, but the idea is that we only top up the cash bucket in a year when our stock/bond portfolio has risen. It's unlikely to fall five years in a row, so we should be able to hold on without ever selling after a drop.

Only equities, cash and pensions for me.
I'm hopeful to be retired within a year.
Due to the nature of my compensation I'll start day one of retirement with enough cash to cover my desired spend all the way until pensions arrive. That would be a super cautious approach so I'd likely invest above 5-7 years of expenses. Ignoring investments for a few years sounds quite nice.

Regarding pensions. As a fellow future UK pensions recipient, I forecast on 160 to GBP (based on "feelings"). But I'm hoping we won't need to take state backed pensions as soon they become available. The deferral increases to the Japan pensions are most tempting as. 1. They increase quicker than deferrals of the UK pension. 2. We'll need to spend money in Yen. So deferring our Japan pensions makes sense to us. More so for my partner as my UK pension entitlement won't pass to her when I die (Probably in Pamplona as predicted by many people who know me..). And obviously increasing the Japan pensions means I'll care less about GBP exchange rate.

In terms of what I'll do leading up to that. Probably being cautious with expenses in early years of retirement to allow for more flexibility to the plan later on. I'm fortunate my partner doesn't want to go on a year long 'around the world' cruise. Although maybe I should have offered to join her....

[northSaver]

If the net yield is 7%+ I suspect the capital value is falling or will fall over the long term.

We bought it new 19 years ago so the building had depreciated since then, the land has appreciated. Overall it's worth less now than what we paid for it. I don't know what will happen to the price in the future. Seems like there's high demand for rental property near underground stations in Sapporo these days.
Also, you probably know more about this than me, but the size of the apartments is good for a higher yield apparently. 8 x 1DK. The downside is that turnover can be higher than more family-sized property.

...
Due to the nature of my compensation I'll start day one of retirement with enough cash to cover my desired spend all the way until pensions arrive. That would be a super cautious approach so I'd likely invest above 5-7 years of expenses. Ignoring investments for a few years sounds quite nice.
...

Thanks for sharing MM. It seems like a large cash bucket is a popular choice among expats and locals alike. The warm fuzzy feel of a thick cash blanket is very comforting I guess.
Sadly my Japanese pension is not worth deferring because a bit more than bugger all is still bugger all

[Tkydon]

That is not the median, Tkydon. It's not even the mean. It's just the middle of the range! (I can't think of a better term for it). Take a look at this:
https://www.investopedia.com/terms/m/median.asp

http://www.murc-kawasesouba.jp/fx/past_3month.php

You can download 15 years of data, Find the min and the max and the Median for any range of dates...

3687 Days of data from 1-Oct-2009 to today.
The 1844th. entry when sorted in ascending order is 148.78

3666 Days of data from 1-Nov-2009 to today.
The The 1833rd. entry when sorted in ascending order is 148.9

[northSaver]

...
3687 Days of data from 1-Oct-2009 to today.
The 1844th. entry when sorted in ascending order is 148.78
...

Thanks, this looks good. My base case for GBP.JPY when calculating future income is 150, which matches the last 15 years' median.

However, I've just used this site to download monthly data from 1990 (daily is available but monthly makes it easier), and after sorting it in Excel the median from 1990 to now is 171. Moneymatters' estimate of 160 is closer to this than mine, but to be safe I'll stick with 150 as a base case - and be happy if it doesn't drop much below that in my retirement years

[Roger Van Zant]

15 Year Range (back to Oct 2009)
Min 117.55
Max 207.94
Current 194.96
Median 162.745
(207.94 - 117.55)/2 + 117.55 = 162.745

34.5 Year Range (back to Jan 1990)
Min 117.55
Max 286.21
Current 194.96 @ 45.90%
Median 201.88
(286.21 - 117.55)/2 + 117.55 = 201.88

Man, imagine getting a full British pension worth, say, 1400 quid per month (I can retire from 2046) at an exchange rate of 286.21!
Would be living like a king here (for my lifestyle, anyways!).