Retirement Options

[Scobie]

I would appreciate the views of forum members on options that we may consider for the next phase of our lives as empty nesters. My apologies for the long post.

My husband is in his early 60s and I am 51. In addition to our family home, we have 5 IPs consisting of 4 units and a house. The IPs are in a mix of single name or joint tenants titles. Our debt free home and IPs are worth about $2.3m with about $750,000 tax deductable debt. Our family home, the greatest asset at about $850,000, is pre 1985. We have approx $200,000 available in LOCs to cover investment shortfalls and $160,000 available in a private/personal LOC. We both work p/t and earn around $1100pw between us. We pay off credit cards fully each month and have no other debt. As our incomes are relatively low, we direct some rental income to the personal LOC and use the business LOC to cover some IP expenses. We have about $80,000 in super between us, the result of broken work careers.

We now wish to explore strategies to support ourselves in retirement. We travel regularly, ‘backpacker’ style. We recently returned from 5 months living in Asia renting out our house while away. We plan to spend more time overseas. We don’t intend to work overseas but may consider working when back in Australia.

I am sceptical about strategies centred on super – despite the acknowledged significant taxation benefits it offers. I get frustrated with being told we are overly focused on property. I guess we are currently adopting a modified form of LOE. However, I think that this would be too stressful as a long term retirement strategy.

We are contemplating buying an apartment in Asia to use as a base and return to Australia for breaks and visit grandchildren. I guess we would want a ‘lock-up-&-leave’ place in Australia. An option may be a ‘granny flat’ at our home with a family member living in the home (required by local council). We could sell the family home but there is some emotional attachment to it, particularly now as we also have grandchildren. We could sell the IP house which would reduce the debt but may incur significant capital gains. This was originally my own family home and several of our sons have lived in it before setting off on their own. It has been rented and claimed as an IP for three years. It is worth about $600,000 If we did sell one of these higher valued properties we also would like to gift some money to our four adult sons (say $50,000 each) in the next few years with a view to not leaving them much in the way of inheritance.

We are still to properly prepare updated wills and enduring powers of attorney, etc but will attend to this shortly.

I would welcome some responses to our situation.

Many thanks
Scobie

 

[PrimeCommercial]

Hi Scobie and welcome to Somersoft.

The absolute best anyone will ever give you in your situation is to see a good financial planner. You'll probably come across a few posts around here bashing financial planners but a good one is worth their weight in gold.

I few things I would consider in you position.

-Your husband being over 60 may be able to convert his super from an accumulation phase to an income phase an as such pay no tax on any profits generated from the fund.
- You are able to have as many funds an you want some still in accumulation phase and some in an income phase.
- Both of you are able to take advantage of increased contributions limits for super.
-You may be able to commence a transition to retirement and benefit from a lower tax rate, althought your combined income being $1100pw you may not benefit from it all that much if you are in a low tax bracket.
-Access to government pension as well as super
-Look at the Low income tax offsets
-Limitations on gifting that will affect access to government pension.
- Living off equity built up in your IP's and PPOR
-Definately update your wills.

There's a heap more things to consider but my wife is calling me to help her right now.
Go and pay for the right advice, it will save you thousands.

 

[Scobie]

Many belated thanks Shady for you comments. My part time work seems to have ballooned just at the moment! I guess finding a financial adviser in Perth sympathetic to property investment will be my challenge! Any suggestions?

I welcome insights from other forum members.

Cheers
Scobie

 

[wylie]

I have sent you a PM. If you check your Private Message box you will see it.

 

[handyandy]

An option may be a ‘granny flat’ at our home with a family member living in the home (required by local council). We could sell the family home but there is some emotional attachment to it, particularly now as we also have grandchildren. We could sell the IP house which would reduce the debt but may incur significant capital gains. This was originally my own family home and several of our sons have lived in it before setting off on their own. It has been rented and claimed as an IP for three years. It is worth about $600,000 If we did sell one of these higher valued properties we also would like to gift some money to our four adult sons (say $50,000 each) in the next few years with a view to not leaving them much in the way of inheritance.

We are still to properly prepare updated wills and enduring powers of attorney, etc but will attend to this shortly.

I would welcome some responses to our situation.

Many thanks
Scobie

Is the Granny flat already 'made' if so I don't see an issue with you renting the house out on a commercial basis and simply using the granny flat regardless of what the council thinks. Personally, I don't see a problem when you rent out the main house and use the granny flat for storage/infrequent stays.

I would be very careful about gifting any money at this early stage. whatever you do you have a lot of years ahead of you and may need these funds at some point. Off course you could always go to them and ask for a handout but who knows what their personal situations will be 5-10 years from now.

I don't think you have enough in super to really worry about centering on this as a strategy. The government have severely restricted the ability to add to super with any great licks but there may be scope for selling down gradually and funneling the profits into super and paying none or greatly reduced GCT. I think that your husband can still put in $50k per year and you can put in $25k thus you can funnel $75k per annum and can then add three years together (or something like that). The beauty of this is that you husband can then draw down this money tax free.

To get the latest details you will need to talk to a professional just to get up on the latest rules.


Cheers

 

[quoll]

I would suggest talking with 3-6 financial planners. It seems very difficult to find a financial planner that gives open advice with no strings attached.

Read investment books and talk to other investors, there are so many strategies available but you need to find those strategies that fit with your mindset and lifestyle choices.

You have a lot of equity that you could use to generate income, read up on annuities (sp), I think they are also called allocated pensions. Have a read about LOE (living on equity).

How many years of retirement living do you think you will need to fund and how much would you need per year? Rough guess about 30 could be as high as 50 or more depends on medical advances.

My view is to live well in retirement you need an asset base that continues to grow with inflation or above inflation while providing you with some cash to spend. Residential housing has been very good at protecting and growing you asset base so one would expect residential house to continue to be a good asset class to store and grow wealth.

I'm only 41 and I would guess my thinking will be different in 20 years when I'm closer to your husbands current age, but if I was in your situation I would be looking at buying a few more houses.

Cheers
Graeme