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I'm 54 years old, with a wife and two kids aged 14 and 10. I work full time on a salary of $110,000 a year. My wife has a home-based business earning $5000 a year. We have $120,000 in super. Our home is worth $950,000, with a mortgage of $195,000. What strategy could you suggest for me to accelerate my net worth so I can retire by 65 with no mortgage and a reasonable sum in super? Is investing in one or more rental properties advisable at my age?

By InvestSMART · 17 Nov 2012

By InvestSMART ·
17 Nov 2012

Comments

You should be salary sacrificing to the maximum, $25,000 a year from all sources, even at the expense of reducing mortgage payments. This will enable you to take advantage of the 15 per cent tax rate on concessional contributions. Now is the time to form an association with an adviser to help you set retirement goals and work out a strategy to achieve them. I doubt that investing in rental property is the best way to go at this time.

My wife and I are considering setting up an investment for our grandchildren. Are share-based insurance bonds best, or is there a better option?

There are a range of options but I believe share-based insurance bonds are the best. Because the earnings accrue in the form of bonuses, there is nothing to declare on anyone's tax return, and after 10 years, they can be cashed in free of tax in whole or in part, or left to grow. Furthermore, they can be transferred to the grandchild free of capital gains tax.

Noel Whittaker is the author of Making Money Made Simple and numerous other books on personal finance. His advice is general in nature. Readers should seek their own professional advice before making decisions. Email: noelwhit@gmail.com.

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Frequently Asked Questions about this Article…

How can salary sacrifice into superannuation help me retire by 65?

The article recommends salary sacrificing up to $25,000 a year from all sources into super to take advantage of the concessional 15% tax rate on contributions. Boosting super now via salary sacrifice can accelerate retirement savings and is suggested even if it means reducing mortgage payments in the short term.

Should I reduce my mortgage payments or prioritise super contributions?

According to the advice in the article, prioritising concessional super contributions (via salary sacrifice) is recommended even at the expense of reducing mortgage payments, because the lower 15% tax rate on those contributions can help grow retirement savings faster.

Is investing in rental property advisable at age 54 if I want to retire mortgage-free by 65?

The columnist expresses doubt that investing in rental property is the best option at this time for someone in this position. He suggests focusing on superannuation strategy and working with an adviser rather than assuming rental property is the right route.

When should I consult a financial adviser to set retirement goals and a strategy?

The article advises forming an association with a financial adviser now to help set retirement goals and work out a practical strategy to achieve them—particularly when you are planning to accelerate net worth and aim to retire by 65.

Are share-based insurance bonds a good way to invest for grandchildren?

Yes. The article recommends share-based insurance bonds for a grandchildren investment because earnings accrue as bonuses (so there’s nothing to declare on annual tax returns), and they offer flexible tax treatment and transfer options after the qualifying period.

What tax benefits do insurance bonds offer after 10 years?

Per the article, after 10 years insurance bonds can be cashed in whole or in part free of tax, or left to continue growing. This makes them tax-efficient for medium- to long-term gifts or savings for grandchildren.

Can insurance bonds be transferred to grandchildren without paying capital gains tax?

The article states that insurance bonds can be transferred to a grandchild free of capital gains tax, which is one reason the author prefers share-based insurance bonds for intergenerational investing.

Who is Noel Whittaker and should I treat his column as personalised financial advice?

Noel Whittaker is the author of 'Making Money Made Simple' and other personal finance books. The article notes his advice is general in nature and recommends readers seek their own professional financial advice before making decisions.