Noel Whittaker is YourLifeChoices’ personal finance guru and assists hundreds of members with their queries. While he is taking a well-earned break, we present a selection of his responses to your queries and which may help others in similar situations.
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Q. Ron
I turned 76 in July and I’m thinking about retiring. However, it seems that because of my age, I am not allowed to put money into super, so I have to find some other way of getting a regular income to see out whatever life I may have left.
My wife died five years ago and some investments since then – including in a taxi before Uber – have cost me dearly. Currently, I have a small management rights business, but feel it’s time to relax a bit and do some more travelling.
I will probably have only about $550,000 to invest, and naturally want to find a way to safely maximise my income, including whatever Age Pension is available. I don’t care if I buy a cheap house, unit or a caravan, or maybe rent somewhere. I’m just hoping to have enough coming in to see me out.
A. As you are now single, you are getting close to the cut-off point for the Age Pension. Certainly, if you buy a cheap unit you will be turning an assessable asset into a non-assessable asset and this should increase your pension enormously. To do the calculations, just go to my website and play with the Age Pension calculators. You will need to use the deeming calculator first to work out what notional income will be applied to your remaining financial assets. Don’t worry about superannuation – it’s mainly about saving tax, and in your situation, tax should not be an issue for you.
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Q. Shannon
We are 60 and 54 years old, and own two houses. We live in one and it is twice the value of our second home, which we rent to our daughter. My wife works but I have been unemployed for two years, we are living off our savings and they are being drained at a rapid rate. What is the best way to prepare for retirement? I have in mind selling the larger home and moving into the smaller one and placing the proceeds of the home sale into our self-managed super fund. What are the ramifications of doing this? We have lived in both houses, the current for 14 years, and the second for nine years. What is your advice?
A. You will need to have face-to-face advice with an expert who has looked into your financial and personal situation. But generally, the first home should be free of capital gains tax as it appears to be your residence, but there could be long-term implications regarding capital gains tax on the second property once you live in it. However, the good news is if you live in it for a long time, any capital gains tax on that property may be quite small. Placing the excess proceeds to superannuation could be useful for tax minimisation, but you would need to make a long-term decision as to whether you may be eligible for an Age Pension. An adviser can guide you through all these issues.
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Q. Deirdre
I have spent a heap of money over the past 16 years. I have no education but heaps of grit. I immigrated with a young daughter, worked hard and put any money I had into my daughter’s education. I’m now 61, so it’s very important that I plan correctly for my retirement.
I will be receiving $100,000 from family in the UK and wish to either invest it in super and build on that, or in shares. I have a stable job three days a week and receive $600 per week from a family commercial property my brother controls.
Could you please offer some advice? My thinking is to probably shore up my super and sacrifice $200 per week into it, then set and forget until I’m 67 and eligible for an Age Pension. I’m renting at the moment and will be for some time – until I perhaps receive an inheritance to buy a home. I just wonder what is the best option. I’d really appreciate some trustworthy options.
A. Certainly maximise your contributions to super. You are allowed a total of $25,000 a year in concessional contributions but these include the 9.5 per cent compulsory superannuation contribution from your employer if you have one. For example, if your employer was contributing $5000 a year, you could contribute an extra $20,000 a year as a tax deduction. Just bear in mind concessional contributions incur a 15 per cent entry tax. I note your comments about buying a house in the future.
If you buy a unit or house, you will be turning an assessable asset in terms of Age Pension eligibility, that is, savings, into a non-assessable asset and this could increase your pension enormously. To do the calculations, go to my website and play with the age pension calculators.
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Q. Andrea
My husband and I are heading into retirement and have finally paid off the house. Apart from a few thousand dollars on our credit cards, we owe nothing. Should we continue to pay for life insurance? We are both insured for $300,000 each, and it costs us thousands to maintain this. Should we continue to pay through the nose when we are on a limited retirement income, just to ensure our adult children get a big payout when we pass away?
A. As you have pointed out, life insurance has a cost and, traditionally, the main purpose is to ensure that your partner can carry on if you die. It is really up to you to decide the best course of action here, but keep in mind it will get more expensive every year and you may well decide that it is now costing more than it’s worth.
I think at this stage in your life, your own personal cash position should be more important than leaving a large sum to your children.
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Q. Dragrush
I would like to know the various ways I can get access to a lump sum, say $75,000, from a fully owned investment property worth around $500,000. I am on a part Age Pension.
A. You sound like the perfect candidate for the government-administered Pension Loans Scheme, which offers reverse mortgage loans to seniors at 5.25 per cent. The scheme is scheduled to start next year.
Do you have a question you’d like Noel to tackle? Email us at [email protected]
Noel Whittaker is the author of Making Money Made Simple and numerous other books on personal finance. His answers are general in nature, and readers should seek their own professional advice before making any financial decisions.
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Disclaimer: All content on YourLifeChoices website is of a general nature and has been prepared without taking into account your objectives, financial situation or needs. It has been prepared with due care but no guarantees are provided for the ongoing accuracy or relevance. Before making a decision based on this information, you should consider its appropriateness in regard to your own circumstances. You should seek professional advice from a financial planner, lawyer or tax agent in relation to any aspects that affect your financial and legal circumstances.
