Ask Paul: I defied a terminal prognosis, how can I improve my finances?


Dear Paul,

I'm in desperate and urgent need of advice. I'm 53 and divorced. Nine years ago, I was given a terminal prognosis, which I have defied. 

I stopped work and have not returned. 

ask paul clitheroe i was diagnosed with a terminal illness

All super and terminal benefits paid off my mortgage and I'm debt free. I will receive $45,000 from income protection insurance until age 65. 

The $100,000 I have sitting in the bank has attracted zero interest in an interest offset account. I'm now scrambling to determine if there's any way I can use this small amount to set up a better future for myself. 

I'm especially concerned about providing for myself once my income insurance stops in 12 years. I've just transferred my cash into a bank account attracting 5% interest (variable). 

I'm wondering whether I should put maybe $70,000 into a high-growth portfolio, with monthly contributions of $2000. I'm not sure whether it's wise or foolish to take on that level of risk at this late stage. Are there alternative strategies I could consider to improve my financial future? 

I'm even wondering if trying to re-enter the workforce to grow wages and super over the next 12 years might be financially necessary if my health allows. 

My unique situation seems a good case study in worst-case scenarios of not investing early and not having adequate (in my strange case, any) superannuation as 'retirement age' looms. - Emma

Goodness, Emma, you have experienced some of the most dramatic highs and lows that life can offer.

My heart skipped a beat when I read your opening comment about a terminal diagnosis, then I was so pleased to read that you have defied that prognosis.

It is easy for me to bang on about health being the most valuable asset we have and you having a second life. While that is true, you've been knocked down, have bounced back with your health, but the reality is that we can't live on health alone, we need to live a life.

And that takes us to the pretty dry subject of money.

You have a terrific base in a fully paid off home and no debts. Using your super and terminal benefits to pay off your mortgage was a great decision. I suspect, given your prognosis, you may have thought of a very expensive holiday to enjoy your predicted short life expectancy.

From this base it makes a lot of sense to look forward and build on your $100,000 in savings and ability to save $2000 a month.

What interests me, though, is that with your disability income of $45,000 a year, after savings, you must be living on not much more than $20,000. If we move to retirement age, and think about adding an age pension, a single pension will provide a similar level of income.

Given what you have been through, and the certainty of a secure government pension in the future, are you stressing your life today by being too frugal?

I know this is not what you were expecting to hear, but if you saved, say, $1000 or $1500 a month until age 65, would it make a lot of difference? Yes, more saving means more dollars, but does this suit how you want to live today?

At a practical level, yes, history would say you should own growth assets for long-term investment. So, a high-growth fund makes sense.

But I imagine you are paying some tax on your income; would you be better off making some super contributions into a high-growth fund and saving on tax?

Obviously going back to work will help you build assets and super. But is this what you want to do and would it impact your income protection payments?

These things I cannot answer.

My broad advice is to enjoy your life today and set a future plan including accessing an age pension.

Yours is a classic case where you need to sit down with a professional planner, or at least do online modelling that sets out a strategy to enjoy life, while building reserves and planning for the age pension for future years.

Most importantly, I hope you continue to enjoy good health.

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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.
Money magazine
July 10, 2024 1.08pm


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Mark Kennealy
July 11, 2024 11.14am

Thanks for sharing Emma! I concur with Paul's advice enjoy your life now. With your house and cash assets and insurance with age pension income you'll be just fine. Best wishes Mark

Mandy Higgins
July 12, 2024 11.49am

Wow, Emma. You are an amazing person to conquer a terminal diagnosis so few have. Like a second lease of life, I commend you for looking at stabilising your financial future... Is there a part time job or 'side hustle' that you could consider which would supplement the income you are now receiving without affecting it? Accepting a boarder (with appropriate checks), pet sitting, part time support for a business or person? Increasing your income and investing it in low risk scenarios would help your position. Thanks for sharing:)