Ask Paul: We're inheriting $400k - how can we keep getting the pension?

Dear Paul,

We have a boat which we live on (so principal place of residence) at present we are in Turkey. Value is around $450,000.

We each receive the aged pension of $721 per fortnight. We have $262,500 owed to us (as a second mortgage) from the sale of our property in Mount Burrell and Centrelink classify the interest they pay is a deemed asset which is good.

We own nothing else and get payment from nowhere, except the pension.  No super. We have inherited $400,000 from John's father. So, with the loan and the inheritance we will have roughly $660,000 cash and a boat.

We really would like to continue receiving the aged pension as we live on this.

What should we do so we can continue to receive our aged pension? Should we buy an apartment, call it our principal place of residence and then have just the boat as our only other asset?

Should we buy a bigger boat and say have $300,000 left which we put into a managed fund? - Sue and John

Sue and John, you have made my day. Like you I am a keen boat person, and I must apologise in advance, because I suspect I love boats as much as you do. But in my experience about the only role boats play in our financial affairs is rapid depreciation and costs to run the darn things.

They are, however, just a joy to be on and I envy you having a boat as your home.

All we boaties are guilty of the "bigger boat syndrome", despite having a perfectly sensible sized boat that suits our needs, I am always on Boattest.com looking at bigger ones. Don't mention this to my wife Vicki!

I think we can agree that boats are a terrible investment. But life is short. If you feel a bigger boat is key to your lives, well, OK, go for it.

But what about health care later in life and so on? If your current boat works for you, and I think your current $450,000 boat would be pretty good, I would much prefer you to buy an apartment as your principal place of residence, live in it for at least six months to protect you from capital gains for a six-year period and then rent it out if you wish and live on your boat.

With investment assets of $450,000, that being your boat, you will still get a fair chunk of pension. While you are at it, get a valuation on your boat, who knows it may be less than $450,000.

As one boaty to another, I feel pretty bad saying this and I do need to say in capital letters, DON'T BUY A BIGGER BOAT, BUY AN APARTMENT AS YOUR HOME.

Incidentally, our boat is called "Balance", give us a "hoi" if you see us out on the water.

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