YOUR QUESTIONS

WE HAVE been working overseas for 11 years. We intend to retire and move back home in the next 24 to 36 months. Our Australian home (which is rented out) is worth about $400,000. We have cash and shares worth $30,000, I have $384,000 in my superannuation and my husband has $391,000 in his. Overseas we have assets worth $140,000. We have no debts. My husband is 60 and I will turn 60 this year. When we return to Australia, our intention is to downsize to a smaller home on the mid-north coast and maintain a lifestyle we hope includes overseas travel at least every two years. How can we get started on the road to financial health in our retirement? C.M.

You might find that house prices have changed somewhat since 2001. So if you plan to live near any large urban centre on the north coast, you possibly won't be able to significantly add to your retirement savings by downsizing from a $400,000 property. Don't forget to take into account capital gains tax if selling your current property - it was free from CGT for the first six years only.

With the top limit for the age pension assets test above $1.2 million and likely to increase, you should be able to claim a small pension at 65 if you were born between January 1949 and June 1952, or 65? if born between July 1952 and December 1953.

If you retire at age 63, as a woman you would have a statistical life expectancy of about 21 years but this means 50 per cent of women live longer than this, so I prefer to budget for a few years longer. Your total assets of about $950,000 will last about 25 years if the money earns on average 5 per cent a year and you withdraw an initial $50,000 annually, indexed at 2 per cent, so less than inflation.

It might be enough but you cannot have too many savings in retirement, and one of the growing realities is the heavy financial burden if one spouse is forced by ill health to move into an aged-care facility. Your plan for the next three years should be to save as much as possible, both within and outside superannuation.

GIVEAWAY COUNTS AS GIFT

We are both on a pension, over the age of 65. We are about to receive about $200,000 from a relative's will. We wish to give the cash in equal shares to our two children. Do we need to advise Centrelink and will this be considered by Centrelink as a gift and reduce our pension? R.C.

Yes, you are legally required to advise Centrelink and, if you give your money away, it will be seen as gifting and be counted by the means tests for five years.

PENSION BEST PLACE FOR CASH

I have just turned 49 and have a house overseas on which I am paying off a mortgage. I have about $100,000 in an Australian pension fund, into which I pay the 9 per cent super contribution, and I contribute an extra $200 each month. I have about $10,000 in savings. Apart from the mortgage I have no other debts. I am married with no children. Advice? R.W.

If you want to live in your overseas home, or if you are sure it will offer huge capital growth, then I can see why you would want to pay off a mortgage. Otherwise, use the money to make additional contributions into super. If planning to retire at age 65 and spend $40,000 a year in today's money ($64,000 in 2028 dollars if inflation averages 3 per cent a year), you will need about $1.1 million in tax-free assets at retirement to last, say, 25 years, assuming the money earns 5 per cent a year and your super pension is indexed at only 1 per cent a year. You have only 16 years. Start saving more!

If you have a question for George Cochrane, send it to Personal Investment, PO Box 3001, Tamarama, NSW, 2026. Helplines: Financial Ombudsman, 1300 780 808 pensions, 13 23 00.