Step-by-step: What happens at the end of the Nest Egg strategy?
You need to build your wealth to get to the ‘end’ of the Nest Egg strategy. Often, investors buy growth properties (like houses and townhouses) and hold on to them while they increase in value.
Then, once you have wealth in those properties, you sell down those growth properties. You pay off any remaining mortgages. And after all of that, you’re left with a big lump sum of cash.
Under this strategy, you invest the money in more liquid assets (such as shares and bonds) and draw regular income to fund your lifestyle. Here’s how it works:
Step #1: Plan your “sell down” period
Most people don’t sell all their properties at once. Instead, they sell over several years.
That gives you time to:
- sell in stages (so you’re not forced to sell in a bad market),
- plan the timing around any tax that needs to be paid,
- set up the investment portfolio as you gradually sell the properties.
Typically, we suggest that investors plan to sell down their portfolios over a 5-year period.
This is where you turn your property’s paper wealth into a lump of cash.
Step #2: Invest the money with an investment adviser
The next step is to find an investment adviser that you trust. These advisers will create a financial plan for you, then help you implement it. That’s often by investing in managed funds, shares bonds and other investments.
You’ll often sit down with an adviser and say: “I want you to transfer $1,000 a week into my bank account. How should I invest my money to make that happen, and how long might it last?”
They’ll recommend an investment mix based on:
- how much income you need,
- how long you want the money to last,
- how comfortable you are with ups and downs.
They’ll also help you figure out if your spending goals are realistic based on the money you have.
This step ends with them taking your money and investing it in managed funds, shares and the other assets you agreed.
Step 3: Gradually sell your assets to draw your retirement income
Next your investment adviser will begin selling some of the assets you’ve invested with them. This is so they can transfer your spending money.
They might transfer you this consistent income weekly, fortnightly or monthly. It’s up to you.
Most investors I see set it up so the investment adviser:
- sells a small amount of your assets regularly (monthly/fortnightly), and then
- they deposit the cash into your chosen bank account.
