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Ask Noel

Each week, financial adviser and international best-selling author Noel Whittaker answers your questions.

Each week, financial adviser and international best-selling author Noel Whittaker answers your questions.

I am aged 61 and plan to retire this year with superannuation of $500,000 after a deduction of 15 per cent as my fund is untaxed. My spouse is aged 66, has $21,000 in super and $5000 in shares. Would you suggest I take an allocated pension, or withdraw the whole amount or a lump sum to invest in shares, bonds or bank fixed deposits?

Keep in mind that superannuation is not an asset class, but merely a vehicle that lets you hold assets like shares and bonds in a low tax environment. You need to be talking to a good adviser, because it would appear that your spouse may be eligible for a part age pension and, if the money is kept in the accumulation phase of superannuation, it will not be counted by Centrelink until you reach pensionable age. If you were born between July 1, 1952, and December 31, 1953, your pensionable age is 65.5. You could re-examine your options once you reach pensionable age. In the meantime, the adviser should be able to help you decide on an appropriate asset mix inside super.

If I salary sacrifice up to 5 per cent of my pay, the company will match it, but this will put me over the $25,000 threshold by $7870, on which I will have to pay 45 per cent tax. Would I be better off contributing the correct amount so I do not exceed the threshold, or put in 5 per cent to gain extra dollars in my super?

The technical people at OnePath advise that from July 1, 2013, if you exceed your concessional contributions cap, the excess is included in your assessable income and taxed at your marginal rate. You can get a 15 per cent tax offset to compensate for the 15 per cent contributions tax paid by the fund. Any additional personal income tax liability is assessed and payable after you lodge your tax return. However, any benefits from deferring income tax are removed by the ‘‘excessive concessional contributions charge’’. This is an interest penalty and applies on the increased tax liability as a result of adding excess concessional contributions to assessable income. Under these new rules, individuals will generally be better off staying within the concessional limits.

I am considering taking out a reverse mortgage on my home. Where can I get the best information about what is available and how it works? Is it possible to get a lump sum and then a monthly instalment of $500? How does this affect a Centrelink pension? I assume they are safe as they have been around for a long time, but are there any pitfalls?

A good source of information is Seniors Australian Equity Release Association (SEQUAL). The conditions depend on which lender you choose, but there are some who will set you a limit and let you draw on it as necessary. This will have no adverse Centrelink implications unless you withdraw a large sum and leave it sitting in a bank account. The sum owing may double every eight or nine years if no repayments of interest are made, which is why you should leave it as late in your life as possible before you take one out. It’s important to involve your family, if you have any, in the decision, as you are effectively spending money that would normally be left to them in your estate. It would be worthwhile having the family pay the interest if possible, as this would prevent the debt from increasing.

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:

You can follow Noel on Twitter – @NoelWhittaker

Keeping your financial heirs in the loop

The explainer

I was surprised at your advice to self-funded retirees at 84, that they ‘‘should be engaging your beneficiaries in any financial decisions you make’’.

That seems to presume the family members understand finances and investments and their advice would be helpful, but what if the beneficiaries don’t have those types of skills; can’t even manage their own personal finances or have prejudices – like they dislike shares and are suspicious of them; or, alternatively, love shares, have none themselves, and are dying to get their hands on some? Or worst of all, someone who thinks they know it all and speaks with confidence and authority, but actually doesn’t have the necessary skills or experience at all!

When the time for the estate to be distributed comes, the simplest solution for the beneficiaries might well be for the executor to have been instructed to sell up everything and to distribute cash. That way each person can then do whatever they wish with their inheritance. Would there be any disadvantages in this?

I understand what you’re saying and it would certainly apply in some circumstances. But when I used the term “engage the beneficiaries”, the purpose of that was to get the children involved and to get across what was happening. That would be a good time to explore which of the children would like to carry on the investments and which would prefer to have the cash as soon as possible. This could have a major impact on estate planning.

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