Ask Paul: We have $550k in an SMSF making just $23 a month

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My husband and I are retired and still have two adult children at home. We have $550,000 in self-managed super, which is just sitting in our Commonwealth Bank account, on which we received a return of $23.37 for January 2021.

We also have $235,000 in cash that we are using for income at the moment, but we are going through it.

We also have a unit on the coast. It cost $330,000 and is returning about $1500 a month, but we still have rates and body corporate fees of $10,000 for the year to take out. We just don't know what to do with our money. - Karen

ask paul clitheroe smsf return cash flow retirement

My inbuilt alarm has just started ringing, Karen. I'm glad you got in touch. $23.37 for the month on $550,000 is indeed alarming!

Cash is a funny thing. It is without doubt one of our safest assets in the short term, but one of our worst in the long term.

As you know, in a decade or so if it is left there and you only spend the miserly interest, you will still have $550,000. Its buying power, though, will be terribly damaged, even with inflation at a couple of percent. Compound this annually and you have lost about 25% of the money's buying power.

And then you have another $235,000 that is supporting your spending needs.

Stay in this position and I imagine with low returns on cash and your spending from your cash savings at the qualifying age you will deplete assets to the point where you will get a part pension and eventually the full pension. This is a valuable safety net.

Your investment situation is just too important to your future to have me dithering around with it in a few hundred words.

So, while I like to answer readers as well as I can, I really want you to go and see a fee-charging, independent adviser.

Your friends or super fund may have recommendations. Or call the Financial Planning Association and go and see a certified financial planner (CFP) - there will be one not too far from you. Don't hesitate to have an introductory chat with a few because you need to be comfortable.

My general view about my money is that the good old third-third-third approach is a pretty good start: a third in property, a third in shares and a third in cash and fixed interest is really not that bad.

A good adviser will give you personalised recommendations. That, of course, will include your coastal property, which I hope is benefitting from the boom in regional areas.

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Paul Clitheroe AM is founder and editorial adviser of Money magazine. He is one of Australia's leading financial voices, responsible for bringing financial insight to Australians through personal finance books, the Money TV show, and this publication, which he established in 1999. Paul is the chair of the Australian Government Financial Literacy Board and is chairman of InvestSMART Financial Services. He is the chair of Financial Literacy at Macquarie University where he is also a Professor with the School of Business and Economics. Ask Paul your money question. Unfortunately Paul cannot respond to questions posted in the comments section. View our disclaimer.