Author Topic: Help, please! $200k to invest, but where?! (Australia)  (Read 2923 times)

Phryne

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Help, please! $200k to invest, but where?! (Australia)
« on: October 19, 2016, 01:35:57 AM »
Hi All,

Firstly, thanks for the fabulous advice & insight here: I've learnt so much cruising this forum!

We've recently sold an investment property, so will have about $200k in cash early next month. Would love your thoughts on what we should do!

Here's where we stand, our stash is circa $960k, our fire number is $1.4m (maybe 6 years away?)

$360k super (half each, I'm 40, husband is 51)
$25k shares (all the one company I work for...)
$375 equity in 2 x other investment properties
$200k investment property sale proceeds

In addition, the mortgage on our home is $250k, and other than small mortgages on the remaining investment properties we have no debt. My income ($140k) easily covers our expenses, savings and my CGT bill this year :-( My husband isn't working right now, and is unlikely to earn a significant salary in the near future so we can park anything in his name for tax purposes.  I am totally tempted to pay down our mortgage, but know our money could work harder!

What would you do???

marty998

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Re: Help, please! $200k to invest, but where?! (Australia)
« Reply #1 on: October 19, 2016, 02:14:31 AM »
This is a very easy one.

Make a non-concessional contribution to your husband's super account of the full $200,000.

He can start drawing a pension tax free in 9 years time. You just need to use your earnings to cover or clear the remaining mortgages in the intervening years.

Once he turns 60, you may find you can live off your property investment earnings or the equity if you decide to sell them. In that case, you should still draw the pension anyway from his super, and use it to top up your super balance for the next 10 years until you hit 60.

Keep as much as you can in super... forget all the noise about changes and blah blah. It's still by far the best deal in town.

Phryne

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Re: Help, please! $200k to invest, but where?! (Australia)
« Reply #2 on: October 19, 2016, 02:33:34 AM »
Thanks Marty! Not really an option I'd considered, but makes sense.

marty998

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Re: Help, please! $200k to invest, but where?! (Australia)
« Reply #3 on: October 19, 2016, 02:48:47 AM »
Curious to know about your story further... where the properties are located, why did you decide to buy them. Did you renovate, or simply just hold them and ride the boom of the last few years?




Anatidae V

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Re: Help, please! $200k to invest, but where?! (Australia)
« Reply #4 on: October 19, 2016, 03:06:50 AM »
When are you planning on retiring? If it's not for 6 years, that means you'll only need to cover 3 years between quitting and pulling super. If you'd like to quit ASAP, i would think something outside super like index shares make more sense?

happy

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Re: Help, please! $200k to invest, but where?! (Australia)
« Reply #5 on: October 19, 2016, 04:44:02 AM »
I feel like I don't quite have the full context, e.g. saving rate, rental income, investment mortgages, how you are planning to arrive at retirement in 6 years. These things might make a bit of a difference to the location of the money.

However accepting what you have said:

Retire at 46 and 57 - you will need 3 years living expenses til hubby reaches 60. ( ? the 25k shares and rental income....see we don't know how much you spend and how much you net from the properties). I would assume though you can stash 3 years of expenses outside super before hubster turns 60.

If you put it in hubby super he'll have 380k and assuming 5% growth, just shy of 600k at age 60 - should give you 24k a year at 4%... plus what you make from your rentals? And plus 4% of the further 4-500k stash growth (minus the 3 years expenses) you say you will accumulate.

I'm with Marty - put it in hubby's super. If you hate debt, pay it off your home mortgage.



Phryne

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Re: Help, please! $200k to invest, but where?! (Australia)
« Reply #6 on: October 19, 2016, 05:01:25 AM »
We lived in two of the three properties- rather than sell when we moved we leveraged the equity as a deposit for the next place & rented them out. The first is an apartment in bayside Melb (purchased 13 years ago, we lived there for 6), and we've just sold our town house in the inner west (lived there for 4). Both are were newish when we bought, we've done next to nothing. The gains are OK to good- great for the townhouse in the last 12 months, hence the sale. While we lived there we also paid the mortgage down hard. Now we live in an C19 miners cottage in regional Victoria, definitely a renovators delight! The other property is a unit in Ballarat which seemed like a good idea at the time... But rent is good & costs are low.

My job is currently easy and very flexible- I work from home more than not, and I get to choose the cool projects to work on.  It has been 'I can't breathe I'm so stressed' busy- not that long ago - so if it goes back to that 6 years won't / can't happen. The $1.4m is our ideal figure with my extra safety nets, bare bones is probably $1.15m. Index shares were my initial thought, I admit!

Since my husband has stopped working, our savings are growing at just under $100k a year. Our expenses in retirement will be $45k after we've sold the units (so no mortgages) and invested that $$ also. I'm ok we can save that & I don't want to carry the IPs into retirement, but can't sell till my income reduces because CGT. Does that help?

Question (another!)
If the money were all in my super, rather than my husband's,  my husband might qualify for some aged pension when he is at that age & I am not. Not so fussed about the pension, but the benefits it may provide? He has medication which it would be nice to be paying $5 for rather than the current full price. Am I way off track here?

Thanks again

happy

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Re: Help, please! $200k to invest, but where?! (Australia)
« Reply #7 on: October 19, 2016, 05:18:13 AM »
He won't qualify for OAP until 67.

However its all starting to sound much more complicated than I could answer...for example I think you are talking about a health care concessions card which you can get with higher asset than the part OAP...what would you save, versus what would you lose by putting assets in your name at a higher tax rate.  I suspect that the limited benefits are not that much. Again it might depend how fast you draw down - the max is 10% up to 65 I think. You might need a financial planner/accountant.

If you put it in your super you can't access for 20 years...and will need 14 year of stash to live off before then. And 20 years of rule changes is a lot longer  and therefore riskier than 9 years.

MsRichLife

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Re: Help, please! $200k to invest, but where?! (Australia)
« Reply #8 on: October 19, 2016, 05:25:10 AM »
An option worth considering is putting the cash in an offset account against your mortgage. It's low risk, the return is relatively high and you have ready access to the cash if you need it for something else in a hurry.

Phryne

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Re: Help, please! $200k to invest, but where?! (Australia)
« Reply #9 on: October 19, 2016, 05:59:27 AM »
Yeah, the OAP consideration might be a bridge too far, and more pain than any possible saving is worth. I just thought I'd read that my super (while inaccessible) was outside the assets test for an OAP for him. Will look into concession cards, that might be all the benefit we need. Good point about the risk of 20 years of changes :-(

The deposit is currently sitting in our offset account against our mortgage, and would absolutely be the easiest option and a decent option. But, with mortgage rates sub 4%, and us being unlikely to *need* the money in the near future- or worse a want becoming a need with easy cash on hand (!) I'd like to explore different options. (And our mortgage is really $280k, we had $30k in the offset prior to the sale.)

Appreciate the ideas & feedback!

happy

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Re: Help, please! $200k to invest, but where?! (Australia)
« Reply #10 on: October 19, 2016, 02:00:53 PM »
If your hubby is not earning anything now, you could try some index funds in his name, and his earnings will be tax free, whereas in super it will be taxed at 15%. But once he hits 60 its better in super.  If however you sell the index funds when he gets close to 60 intending to drop it in super, you'll trigger CGT. Also them damn rules on lump sum deposits might change.

Its also your risk profile....4+% against your mortgage is pretty well risk free.  You could always choose a high growth option in the super fund if you want to chase yield.

Edit,
sorry rambling and doing this in a hurry. my bad.

Your age differences  do carry some advantage... I would suggest you still look at the long term plan out to OAP age and beyond, and methodically work out a series of scenarios based on where you put the money and looking at the tax/benefits implications.  I'm not expert so I will shut up now.
« Last Edit: October 19, 2016, 02:26:54 PM by happy »

Phryne

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Re: Help, please! $200k to invest, but where?! (Australia)
« Reply #11 on: October 19, 2016, 02:56:27 PM »
Thanks Happy! It's nice to have options, and, of course we don't need to put it all in one place. Offsetting it against our mortgage got more support than I expected which is interesting, I guess it's more advantageous in Aus than elsewhere.

Tell me, why do you say the money would be more advantageous in super when he's 60? I feel I'm missing an important piece of the puzzle...