I’m 65, and I want to retire in two years. How should I invest $200k?
Can you suggest how to invest $200,000 from a past due deposit? I’m 65, debt-free and have $500,000 in super savings. Online reviews seem super positive, but since the stock market is near record highs and I plan to retire in two years, would this be advisable if the market drops significantly between now and then?
All going well, your retirement savings have a lifespan of about 30 years from this point. When you retire, it will switch from savings mode to retirement mode. If you work with an advisor, there will likely be some changes to your investment allocation, but largely your retirement savings will continue as is.
The most important change will now be that the fund will pay you an income instead of receiving regular contributions from your employer.
Given this time frame, I hope you can see that your concerns about market volatility are misplaced. Investment markets can go down from time to time and this is the price we must accept for the higher returns provided.
Significant declines are rare and unless you sell during these periods they don’t matter much. I’m not worried at all about the markets being at record levels. Markets are often at record levels.
And it’s likely that not all of your super savings are in the stock and property markets (where there is volatility) anyway. Most funds will have cash and bond holdings to soften the blows.
It would be prudent to ensure that a portion of your retirement fund is invested in low-risk assets. Check out the investment options in your fund and consider placing a few years of retirement living expenses in a lower-risk option.
This will provide you with a solution if your retirement coincides with a down market. Instead of selling your growth-oriented investments at low prices, you can live off the amount in the low-risk option.
I recently sold my house and will be living with my daughter for six months until my new house is ready. I live on age pension. Will the money remaining in my bank account from the property sale hit my pension until I pay for the new house? Will I have to pay taxes?
It may affect your retirement. Centrelink allows an exemption from the means test for up to 24 months to meet the needs of the transaction you are undertaking. However, money in the bank will still be included in the means test through a process called counting. Deeming is a simplified way for Centrelink to estimate how much income your investments will generate.
At least bank interest equivalent to this accepted rate should be generated. So even though your pension may be cut, the interest you earn on your money while you wait for your new home to be built should more than make up for it.
As your regular income decreases, keep some of the sales proceeds in your daily account so you have a comfortable cash cushion. Then put the rest into an investment that pays interest every month. Make sure the investment is a simple bank deposit. In this case you definitely don’t want anything with market volatility.
I do not know the amounts here, it is very difficult to comment on the tax question. Interest income is taxable, but you also have a fairly generous tax-free threshold.
Paul Benson is a Certified Financial Planner. Guidance Financial Services. He is hosting Financial Autonomy podcast. 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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Paul Benson is a Certified Financial Planner and host of the Financial Autonomy podcast.
