My wife and I are 50 and own our home. I have $635,000 in super and she has $280,000. We own two investment properties worth $1.3 million, with a loan of $620,000, and receive $45,000 rent annually. We have a share portfolio of $280,000. We receive a combined salary of $240,000 and hope to retire at 55. What is your advice to ensure we
retire comfortably without financial worries?
You are well placed for retirement with an unencumbered home and about $1.7 million in net assets as well. The perfect situation would be retiring debt-free, so I suggest you salary sacrifice the maximum to super with the aim of creating a fund within super to pay off the investment debts when you reach retirement age.
I'm 63, my husband is 68. We own our home and have two adult children who are both financially independent. I am nearing retirement and would like to know what factors I need to consider in making a decision regarding my defined benefit superannuation scheme. My options are to take a guaranteed annual pension of $62,000, which is adjusted at 2.8 per cent annually, or a lump sum of $750,000. My husband and I have a self-managed super fund, which has $480,000 invested in a mixture of managed funds, shares and fixed deposits.
The main factors to consider are your longevity, whether you wish to leave a lump sum to your children, and your confidence and experience in handling a large sum. Your adviser should be able to help you decide.
I'm 44 and my husband is 43. He earns $180,000 a year and my wage is $40,000 a year. We have two children about to start high school at $10,000 a year each. We owe $70,000 on our home worth $850,000. We own a rental property worth $370,000 and owe $470,000 on it. Capital growth is not happening. It's rented out at $400 a week and the repayments are high. Should we sell the rental property? We would be left $100,000 in debt but funding that would be easier than a $470,000 mortgage. Would we still be able to claim the interest on our tax? My husband has another two years on his current wage, which will then drop to $100,000 a year. I'm worried we would struggle to meet the loan repayments. Should we cut our losses?
It appears you have a cash shortfall of about $15,000 a year but part of this will be refunded to you when you do your tax return. When you take these numbers into account, it's probably costing you $10,000 a year to hold the property. If you don't think it will appreciate by that much, it might be best to sell. The position regarding deductibility of interest when the asset has been sold is complex. You'll need to take advice from your accountant.
My husband is 74 and working
full-time. I'm 67 and working
part-time. We plan to retire in December. We both salary sacrifice into super, with my husband's balance at $190,000 and mine at $140,000. We own our home, worth $600,000, plus an investment property bought for $460,000 with an interest-only mortgage of $360,000. We have $40,000 in an offset account and $10,000 in the bank. If we sell our house and move into the investment property, how will this affect the part-pension? Given our ages, would we be wiser to make our four adult children the beneficiaries of our super instead of each other so we don't jeopardise our pension entitlement?
You will be assessed under an income and assets test but your principal residence will be exempt. It appears that you will have about $600,000 in financial assets if you sell the property and pay off the mortgage on the rental property. This should entitle you to a pension of about $637 a fortnight. This number will change if your super balances build up or you don't realise as much for your house. Who you name as beneficiaries in your super will not affect your pension entitlements but you should take advice about leaving some assets to beneficiaries instead of each other. This will maximise the aged pension to the survivor when one of you dies.
Advice is general readers should seek their own professional advice.
Contact noel.whittaker@whittaker macnaught.com.au. Follow him on Twitter: @noelwhittaker. Questions to: Ask Noel, Money, GPO Box 2571, Qld, 4000, or see moneymanager.com.au /ask-an-expert.
I'd like to see my grandchildren have money for their education when they reach 18 and have opened a children's account which gives 10 per cent interest if you deposit $25 a month.
I'm concerned that when the account reaches $416 in interest it will be heavily taxed. Is there a better way to organise an account for the grandchildren without adding to the trustee's tax commitments? I can see that the $416 will be reached in a year or two as we also intend to gift any spare cash we have to the grandchildren's account.
You will be subject to the punitive $416-a-year children's tax rules irrespective of whether the funds are in the child's name or the name of the trustee. A better option is to place the money into investment bonds where there's nothing to declare on anybody's tax return each year and where the asset can be transferred to the child without capital gains tax at the appropriate time.