Money Makeover: ‘Can I retire next year and live off my buy-to-let properties?’

While investing is the best way to protect your wealth from being eroded by inflation, it is not for the faint-hearted. The US stock market, the world’s largest, has had a rocky start to the year, with the benchmark S&P 500 index shedding 5pc of its value in the past three weeks. 

Watching the market’s ups and downs can be nail-biting when your money is on the line. Investing in property is, in some ways, more comforting – you can see your wealth at work – but returns are often not as good.

This is the conundrum that Arjan Shah*, a 60-year-old engineer from Ilford in east London, faces as he approaches retirement in the next 12 months. “I want to stop working next year but I don’t know what to do with my £140,000 cash savings,” he said.

Mr Shah, who works as a project manager at Transport for London on a salary of £65,000 a year, wants to know how best to utilise his savings to support his pension plan.

“I want to keep around £25,000 as a cash reserve, but I don’t have any lavish plans for when I stop working,” he said. “Maybe a couple of holidays here and there, to visit Malaysia or Singapore, where I have lived in the past. But other than that I would like to know how to best grow my savings.”

Mr Shah has already invested in the buy-to-let market and has one property in London and another in Liverpool worth £380,000 and £210,000 respectively. They provide him with an income of £1,450 a month.

He lives with his 57-year-old wife, who does not work, in a home worth £500,000. He has an outstanding mortgage of £215,000, into which he pays £1,400 a month. He is targeting a net retirement income of £3,500 a month. Once he has paid off his mortgage he expects to need around £2,000 a month in income. 

“I have some exposure to the stock market through my pensions [worth £182,000] and I think it is probably what I should do with the £140,000. I want to know whether I am getting as much as I can. I want to maximise my return, that’s the goal,” he said.

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