$1,000,000

[mackenam]

Hi people
I'm new to this forum and have 1mil in smsf ,just taken package from work am sixty and cant see much point buying property to rent out if rent is offset with paying rates body corp repairs etc , to me if the property in not going up in value then would be better of sticking it in term dep at 6 percent tax free= sixty thou a year ,to get that i would need six properties at two hundred rent less expenses , of course i have the silent killer inflation , own my own pad in Melbourne.Any ideas been watching Margaret Lomas looking at Rocky Toowoomba and Ipswich,serious ideas please.
Sandy

 

[vaughan]

Hi people
I'm new to this forum and have 1mil in smsf ,just taken package from work am sixty and cant see much point buying property to rent out if rent is offset with paying rates body corp repairs etc , to me if the property in not going up in value then would be better of sticking it in term dep at 6 percent tax free= sixty thou a year ,to get that i would need six properties at two hundred rent less expenses , of course i have the silent killer inflation , own my own pad in Melbourne.Any ideas been watching Margaret Lomas looking at Rocky Toowoomba and Ipswich,serious ideas please.
Sandy

Yup, put it in the bank. Everything else carries risk.

 

[BMan]

agreed just live off the interest dont touch the principal as then your interest will diminish
if you want to purchase something big then get a loan and pay it off like you would if you were only earning 60k a yr

possibly not the best strategy but not worth risking it imo it will definitely last a lifetime

 

[Peter_Tersteeg]

Hi Sandy,

I'm not convinced that pulling that kind on money out of a SMSF to buy a property is a good way to go. You might find that it'll cost you quite a bit in tax both initially and ongoing, depending on what sort of strategy you choose.

I'd be looking at the most appropriate way to make use of your money within your super structure so that it can give you the retirement you want for as long as you need. Taking the money as a lump sum is more likely to put you at a disadvantage.

Purchasing property via super in a pension phase would not be what I'd recommend for most people as it can become difficult to meet the madatory drawdown requirements.

Realistically this is where you need to talk to a financial planner and get some advice on transitioning your fund into a pension phase (from an accumulation phase).

If you're still interested in working for a while longer part time, you may want to consider a 'transition to retirement' strategy, where you can suppliment your income from your super, but don't have to start fully drawing down on it.

 

[sanj]

Hi Sandy,

I'm not convinced that pulling that kind on money out of a SMSF to buy a property is a good way to go. You might find that it'll cost you quite a bit in tax both initially and ongoing, depending on what sort of strategy you choose.

I'd be looking at the most appropriate way to make use of your money within your super structure so that it can give you the retirement you want for as long as you need. Taking the money as a lump sum is more likely to put you at a disadvantage.

Purchasing property via super in a pension phase would not be what I'd recommend for most people as it can become difficult to meet the madatory drawdown requirements.

Realistically this is where you need to talk to a financial planner and get some advice on transitioning your fund into a pension phase (from an accumulation phase).

If you're still interested in working for a while longer part time, you may want to consider a 'transition to retirement' strategy, where you can suppliment your income from your super, but don't have to start fully drawing down on it.

can you (or anyone else) pls elaborate on this point? my initial thought was why not buy a commercial property in cash with a good tenant and lease on it. something fairly defensive was my idea but i have no idea re drawdown requirements

 

[Peter_Tersteeg]

Yup, put it in the bank. Everything else carries risk.

Here's an analysis of what carries more risk and what has better returns:

1. Put the money into the CBA in a savings account.
2. Put the money into CBA shares with a franked dividend.

Option 1 will return about 4-5% full taxable.

Option 2 will have reasonable dividends, often in excess of 5%, fully franked so the tax is already paid. The value may fluctuate, but the long term trend is definitely upwards. History has shown that when there's signficiant drops, the dividend has increased (the banks are still making a significant profit).

For you to loose all your money in option 1, the bank needs to go under.
For you to loose all your money in option 2, the bank needs to go under.

If the CBA goes under, the Australian economy collapses and the people who are worth the most will be the ones with guns and ammo.

Feel free to do an analysis of what would have happened if you had put $10,000 into bank shares at the end of the last major market crash (1988), verses putting it into savings at the same point in time. I'll take the shares thanks!

Money in a savings account will give you reliable and immediate cashflow. It's a pretty lousy investment strategy for anything longer than about 3 years.

Whatever you do, keep your money in your super. At 60 it's a far more effective ownership structure than anything else and you can invest in the same investments as if the money is in your own name.

 

[JWR]

Whatever you do, don't put it in the bank! Inflation and tax.

Buying property essentially allows you to have free money from the ATO if you do not sell (assuming capital growth)

Go see a fin planner who can structure it correctly for you.

Even at 60 years old, you still have a good 20-30 years left in you. Therefore buying property (or shares) would be a good idea imo.

I know you probably want to be defensive in the asset you buy/hold - but if you are serious about retirement you have to have growth assets and not just those that bring income. Although you can have both (positive cashflow property).

$1M isn't too much - $50k for 20 years (but I assume you want at least double this to retire comfortably). If you put it in the bank you will make in real terms almost nothing.

Read Jan Somers book - it will explain it well.

 

[Peter_Tersteeg]

In pension phase you must make minimum drawdown amounts. It's currently 3% of the fund value for people under 65. The percentage increases with age.

If your SMSF is holding high growth properties, it may be difficult to consistantly pull 3% or more out per year so you have to sell the property.

If you don't keep the fund compliant, there are stiff penalties involved. This is why you need to get proper advice from a planner, especially when it comes to superannuation.

 

[Mick C]

Seek advice from a financial planner- As Pete mentioned; at 60, retired and with 1m in SMSF- property may not be your best bet- as it has it's risk + not as liquid.

The choice are endless and each one has it's pro and cons- 7 years Insurance bond, Cash bond, cash etc...

Regards
Michael

 

[handyandy]

In pension phase you must make minimum drawdown amounts. It's currently 3% of the fund value for people under 65. The percentage increases with age.

I am told you can counter this by re contributing the draw down back into the pension fund (transition phase)?

If your SMSF is holding high growth properties, it may be difficult to consistantly pull 3% or more out per year so you have to sell the property.

If you don't keep the fund compliant, there are stiff penalties involved. This is why you need to get proper advice from a planner, especially when it comes to superannuation.

There's a lot to take in with the whole super scenario. The problem with seeing a financial adviser is that they want to get you into 'their' products regardless of whether the products suit.

Cheers

 

[Peter_Tersteeg]

There's a lot to take in with the whole super scenario. The problem with seeing a financial adviser is that they want to get you into 'their' products regardless of whether the products suit.

Cheers

Or you can simply pay them to give you advice on a strategy, which is what financial advisors usually do with a SMSF.

Financial advice is best when it's about strategy and risk mitigation. Product recomendations are secondary.

 

[Ian (WA)]

Might I suggest you follow the link and do some thorough reading? Brilliant site for what you are after. I think you'll just get confused with varying responses here.

Perhaps send your questions through to Trish Power herself.

http://www.superguide.com.au


Ian.

 

[Melbournian]

being 60 and having taken a package
would say just put it in the bank and enjoy life.

 

[Deltaberry]

Interesting thread as I've been pondering about something similar. Depending on risk tolerance and age etc, I'd say you'd aim to make 10x of the money in a few years via leverage and timing markets.

Easy way to double it would be to short the A$. So you only need to make 5x in another jurisdiction to achieve 10x. Absolutely doable. Just need to work out your cash flow. If you can achieve 20% return on equity (~$200k pa) plus get additional cashflow here (let's call it $100k), you have $300k to live off.

In the meantime some currency movments and asset price movements (from a low base) on leverage will deliver you 10x.

 

[Rezix]

being 60 and having taken a package
would say just put it in the bank and enjoy life.

Are you paying tax on the interest, Melbournian?

If so, you could avoid that completely by making a non-concessional contribution to super and commencing the pension phase of your fund. If you don't want to invest in shares or property, you can put it in a term deposit or online savings account through super...

Really should speak to a planner if you are in the 55 - 70 age bracket, as the tax savings alone will far more than eclipse any fees we charge you.

 

[Melbournian]

Are you paying tax on the interest, Melbournian?

If so, you could avoid that completely by making a non-concessional contribution to super and commencing the pension phase of your fund. If you don't want to invest in shares or property, you can put it in a term deposit or online savings account through super...

Really should speak to a planner if you are in the 55 - 70 age bracket, as the tax savings alone will far more than eclipse any fees we charge you.

was talking abt the orginal poster.
i only graduated from university less than 10 years will check it up in 30+ years time.

 

[Peter_Tersteeg]

was talking abt the orginal poster.
i only graduated from university less than 10 years will check it up in 30+ years time.

You'd get a lot of benefit from a FP if you spoke to one now.

There's a lot that a planner caan do for you if you set things up when you're in your 20s. No doubt people here are primarily interested in property, but setting up super and insurances properly when you're young can pay huge dividends when you're older.

 

[oracle]

Interesting thread as I've been pondering about something similar. Depending on risk tolerance and age etc, I'd say you'd aim to make 10x of the money in a few years via leverage and timing markets.

Just remembered something from an interview of Warren Buffett where he said leverage is a wonderful thing, it usually works 99% of the time, but the 1% of time it doesn't work everything is finished.

You know when the best brains who wrote the models that the rest of the world used for trading couldn't survive beyond few years due to their leveraged positions the above stmt has some merit. And Yes, I am talking about LTCM.

I use leverage myself but am very careful nowadays not to get too greedy, constantly trying to bring the LVR to much more manageable levels.

Cheers,
Oracle.

 

[JWR]

Buffett also says that when you have made your money and don't need anymore, do not leverage under any circumstances.

I will take that advice - but until I am rich....

 

[oracle]

Buffett also says that when you have made your money and don't need anymore, do not leverage under any circumstances.

I will take that advice - but until I am rich....

When leverage is working for you and you are making $$$ you will always feel I should keep going why should I stop now. Making money is easy. And again rich is a relative world. Compared to 3rd world countries you are already considered rich.

Cheers,
Oracle.