I have paid off my mortgage. How should I invest $100,000

The only thing that really matters to you is the price you buy and the price you sell. It doesn’t matter how the price moves between these two points. Therefore, do not look at it as ideal!

Products such as ETFs (exchange-traded funds) are a great way to gain exposure to the stock market while also reducing risk through diversification. Hundreds or even thousands of individual companies may be represented in a single ETF; Therefore, you are not tied to the performance of a single company.

You can also invest beyond Australia through ETFs; This is important given that our market is highly concentrated in banking and resources. And unlike property investment, there are no maintenance costs, land tax or large stamp duty bills when you buy.

You can also look at traditionally managed funds, which have the advantage of not intermediating the trades. There are balanced and growth options that are much the same as your super fund offerings, so perhaps you can find something that offers the prospect of better returns than cash in the bank but also allows you to sleep well at night.

I recommend staying away from individual stocks. Even the pros struggle to beat the market average in the long run, so your chances of getting better are slim. It’s likely that some form of funding solution will give you a smoother journey.

Among reports of extra tax on those with pensions of more than $3 million (which I don’t care about), there was passing reference to changes for lower earners. But I haven’t seen any details about what these changes are. Can you please fill in this gap?

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When we invest money for retirement, it is taxed at a rate of 15 percent when it reaches the fund. This is called contribution tax. The general suggestion is that this is attractive compared to the tax you would pay if the money was given to you as part of your normal salary. This tax incentive helps offset losing access to your money until you are 60 or older.

Most workers are subject to a tax rate of at least 30 percent, so a 15 percent tax on money they put into retirement funds is really attractive by comparison. However, for those making less than $45,000, the tax rate is only 16 percent; so a 15 percent tax on pension contributions gives them only a 1 percent benefit.

To solve this problem, the government has a scheme called the Low Income Pension Tax Offset, which sees low earners paying into their super fund to effectively offset contribution taxes. Thus, those who qualify will also be able to benefit from tax advantages on the money they deposit into the retirement fund.

The latest changes announced increase the convenience and generosity of this program. The eligibility threshold was increased from $37,000 to $45,000, in line with existing income tax ranges, and the maximum amount paid was increased from $500 to $810 per year.

Paul Benson is a Certified Financial Planner. Guidance Financial Services. He is hosting Financial Autonomy podcast. For questions: paul@financialautonomy.com.au

• The advice given in this article is general in nature and is not intended to influence readers’ decisions about investments or financial products. They should always seek their own professional advice, taking into account their personal circumstances, before making any financial decisions.

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