Ask Paul: We're in our late 60s with no super
Dear Paul,
We are self-funded retirees in our late sixties. We have nothing in super as we didn't want to pay the associated fees.
We have one investment property earning $20,000 per year and cash in term deposits. What's the best option for self-funded retirees? - Julie
Your question, Julie, has many answers!
One of the reasons I really enjoy answering people's questions is that we are all so different.
My wife and I are also in our late sixties, in fact, as you read this issue of Money, I'll have turned 70.
The best option for us is a broadly diversified portfolio. We love our super as it holds assets for us at a very low rate of tax and, while super fees were high in the early days of super, it is now a very low-fee option.
We also like to hold shares. The idea of owning a part of our major businesses appeals to us and the fully franked dividends we earn are terrific.
Investment property is probably our least favourite asset as we find ours quite labour intensive with repairs and maintenance as well as quite expensive to run. But we do appreciate the further diversification it provides to our portfolio.
In your case, super is not an option you like, and perhaps you also don't feel comfortable with shares, that is fine.
We should only hold assets we feel comfortable with, in particular as we get to retirement - the 'sleep at night' test is a good one when it comes to what investments you hold.
Your property is generating a nice income and this should increase with inflation, and you have your term deposits. These, of course, are very safe, but I do worry that if a large proportion of your assets is in these, that they provide no protection from inflation as time goes by.
You mention you are self-funded retirees, but I strongly suggest you check to see if you qualify for the age pension.
As a couple, you can earn nearly $100,000 before the income test would mean you don't qualify. You would also need to pass the assets test, but it is well worthwhile checking. Even a dollar of pension gives you extra benefits.
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