Assets owned but cash (income) poor. Options please?

[maadha]

Hi all,

Chating to my mum today she revealed that she hasn't got enough cash to visit us for xmas (we live interstate). We'll go to her this year but it got me wondering ...Why, where is the income?

Here is her situation. Has anyone here had experience with situations like this and what advice can you offer.

Age: 60
PPOR: $750K (owned outright)
IP: $350k ($125k on overdraft against this property)
Income: Pension only.
Super: $0
Shares: $0
No other debts.

She lives in Qld near Gympie.

I recommended she speak to someone to get her finances mapped out and then a plan put in place but not sure who that would be. An accountant, Mortgage broker, Financial planner?

She is concerned that she needs to sell her IP to pay of her overdraft but then where does her income come from?

I have searched for other similar situations on here but the difference with my mums is the lack of income other than the pension. Any pointers\ideas would be appreciated.

Thanks

 

[Aaron_C]

For such an in-depth analysis of her finances, a financial planner is most apt.

Won't her rental income from the property be more than enough to cover the interest on the overdraft? Why does she have an overdraft? They are generally quite expensive compared to normal home loan rates. She shouldn't sell unless she really has to.

 

[The Y-man]

Defnitely a financial planner.

Who went through the paperwork to determine her centelink eligibilities?

The Y-man

 

[Terryw]

Is the IP rented?

 

[Deltaberry]

For all the hoo hah, it all comes down to a very simple point. How much money does your capital generate for you? @ $350k it generates $18k pa on 5% yield. At 6% borrowing costs the $125k overdraft costs $7.5k

So your mum's capital is generating $10k for her pa.

As a suggestion, you could sell everything, reset, buy a $300k house further out, invest $ $785k in to investments that generate say 7-8% at least. If you buy TLS you get 10%, which is $78.5k pa.

 

[Sheryn]

Age: 60
PPOR: $750K (owned outright)
IP: $350k ($125k on overdraft against this property)
Income: Pension only.
Super: $0
Shares: $0
No other debts.

She lives in Qld near Gympie.

One suggestion...

If she can get 750K sell PPOR for 750K - selling costs of say 25K = 725K pay off overdraft of 125k on IP = 600K left which is invested at 5.5% gives her 33k to live on.

$33,000/52 is $653 a week which is a lot more than single pension!

She moves into her IP which is now her paid off PPOR and would have much more income than surviving on the pension.

She may be still be entitled to low income earners health care card and receive her pills subsidized.

Second suggestion...
Start her own SMSF to put her 600K in as tax free inside super after 60 years of age.


Personally I have seen/heard people do without creature comforts so they get the "most" pension available to them and leave an inheritance whereas they would have been better off to rejig their finances.

BTW
What type of pension is she on at 60 years of age as I thought you had to be 65 years unless disability etc.

Talk to Centrelink as they can give general advice too.


Sheryn

 

[Sheryn]

As a suggestion, you could sell everything, reset, buy a $300k house further out, invest $ $785k in to investments that generate say 7-8% at least. If you buy TLS you get 10%, which is $78.5k pa.

Deltaberry
Yes you could get more money investing in TLS (Telstra) at the present time but do you think a 60 year old pensioner who has no shares should start investing in shares?

 

[Peter_Tersteeg]

A financial planner is going to give the most appropirate advice on this, but as Sheryn suggested, selling her home is probably the start.

She could move into the IP, or possibly sell that as well and then rent.

A big part of this strategy might be to move some of the money into super, where returns can then be drawn tax free. Superannuation is a bit of a dirty word here, but if you're retirement age, nothing beats it for reducing tax!

Figuring out the best combination of keeping things in personal names, or in super, giving consideration to means testing, pension entitlements, etc. is where a financial planner can be really useful.

 

[Deltaberry]

Deltaberry
Yes you could get more money investing in TLS (Telstra) at the present time but do you think a 60 year old pensioner who has no shares should start investing in shares?

Yes if it gives you $75k to live off. Or you can always live off $10k.

I don't understand what age or all this hoo hah has to do with anything.

Don't we all invest to improve our quality of life? @ 60 with $10k pa, what's the point...?

 

[maadha]

Thanks everyone...

Any recommendations for a financial planer. Prefer around Hervey bay, Noosa but even Brisbane if a good recommended FP is based there.

Cheers.

 

[The Y-man]

By the way, one of the things my mum did (she lives by herself in a large house) was to take on boarders to share costs.

The Y-man

 

[wobbycarly]

Reverse mortgage on the PPOR?

 

[Dazz]

Any recommendations for a financial planer. Prefer around Hervey bay, Noosa but even Brisbane if a good recommended FP is based there

I believe Noel Whittaker lives in Brisbane, he's helped the odd person or two.