We’ve just sold our $1.2m investment property. What should we do with the money?
By Paul Benson
My wife (61) and I (76) are retired with an SMSF and a mortgage-free home, and have just sold an investment property for $1.15 million. I’m seeking advice on how to invest it. I have 25 years’ share investing experience via our SMSF, but this lump sum feels daunting.
There is a wide array of potential ways that you could invest this money.Credit: Dionne Gain
Thanks for your question. Given the sum involved here, you should certainly obtain professional advice. Your wife, at 61 years of age, could potentially add to super with some of these proceeds, which might be quite tax-effective and helpful for you both. There are plenty of other options available that a financial planner could assist you with.
But in order for a financial planner to be able to help you, there is one key thing they will want to know – what is your objective?
Do you want this money to produce extra income? Are you trying to maximise the value of your estate? Pay for your grandkids private school fees? Perhaps you want it to grow to ensure you have funds available later in life for any aged care needs that may be required. Maybe you are looking to make some early inheritance gifts, or support charities of interest to you. These are just some examples of goals that we see.
There is a wide array of potential ways that you could invest this money. If you and your wife can get clear on what you want this money to do, a financial planner will be able to build a solution that hits the nail on the head for you.
I am 37 years old and expecting my first child this year. I am contemplating an investment bond product and having the product vest in my child’s name at the age of 25. As that will be near my retirement age, under the current rules, will the investment bond count as an asset or income by Centrelink when assessing my entitlement to the age pension? And will the vesting to my child at the age of 25 count as a “gift” that Centrelink will assess for five years?
Great idea. Twenty-five years allows for plenty of compounding.
Until the bond vests, it would certainly be considered an asset of yours as you are the controller. When it vests upon your child turning 25, it would be considered a gift, and so the balance, less $10,000, would be considered yours for five years. This is with the very significant caveat that these are the rules as they stand today. We are talking about a long way into the future here.
My wife is about to retire with a defined benefit fund paying a non-indexed pension. She has the option to take part as a lump sum. She is 60 so we are concerned about the loss of purchasing power over the next hopefully 30-odd years. Should she take the full pension (more than she needs) and invest $3000 to $4000 a month for 10 years, or take 20 per cent as a lump sum and invest it upfront? Her super balance is $1.8 million.
I would expect the lump sum withdrawal used to fund a growth-oriented portfolio would produce the best result given the full amount will be invested from day one, providing a longer period of compounding. To be definitive, we’d need to run the numbers.
Both of your solutions work, however. The most important thing is to do something. You are right to identify this as a potential issue later in life.
Paul Benson is a certified financial planner at Guidance Financial Services. He hosts the Financial Autonomy podcast. Questions to: paul@financialautonomy.com.au
- Advice given in this article is general in nature and is not intended to influence readers’ decisions about investing or financial products. They should always seek their own professional advice that takes into account their own personal circumstances before making any financial decisions.
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