I’m about to get my inheritance. Should I buy a Lamborghini?
Idea
I will receive a significant inheritance next month. My first port of call will be to pay off the mortgage, but after that I’m lost. Super, shares, properties, term deposits, Lambo? I am 51 years old and single. There is no urgency to retire.
I would prefer Porsche over Lambo, but to each their own!
Your starting point here should be to think about your goals. What specifically do you want to achieve in the next decade? Locking in long-term financial security provides great peace of mind. And once the mortgage is gone and the nest egg is set aside, maybe you can pursue fun things like a sports car.
Traveling is a common goal for many people. Maybe you can use some of that money to walk the Camino, see the seven major cities in Africa, or explore your family history. Money is an enabler. What do you want it to enable?
Once your goals are clear, meet with a financial planner to develop a strategy. You won’t even be able to take two bites to solve this, so get some help and solve it the first time.
My son recently broke up with his partner; They had an eight-month-old child and were living in a rented house. He is self-employed with a variable but reasonable income and savings of approximately $80,000. It’s unlikely he’ll qualify for a home loan. I’m 63, work part time, own my own home, have a pension of about $200,000 and $250,000 in savings. I want to help my son avoid paying rent.
Would it be better to buy a property in my own name and rent it out (with the intention that it would eventually pass to him) or buy in joint names?
I appreciate your desire to help your son, but can you really afford to buy a property to support him? This will deplete your savings and require you to take out a mortgage. You’re in a solid financial position to take care of yourself after retirement, but from what you’ve outlined here, it seems to me that you need all of your financial assets to make sure you’re financially secure.
Your son has many working years ahead of him, and his income will likely increase as he gains more experience. He will get through this and will undoubtedly thrive for years to come. You’ve worked hard to raise it and build your own financial security. There is no need to sacrifice this anymore.
Last financial year, I used the step-forward rule to put $360,000 into the retirement fund following the sale of a property. It was explained to me that if this was done I would not be able to contribute for the next two years. But can I still make tax-deductible contributions? I am 62 years old and retired.
Yes, you can. The front-end element refers to post-tax (non-concessional, to use the jargon) contributions. Tax-deductible (concessional) contributions have a separate limit of $30,000 per year.
Two things to note. Be careful not to exceed $30,000, perhaps due to some employer contributions, because the excess will be applied to the nonconcessional cap and you have no room there. Also note that once your concessional contribution reaches your fund, a 15 percent tax will be applied; so make sure this makes sense for you.
If you are retired and living off a tax-free, account-based pension, a tax-deductible contribution will not benefit you at all and may not even be allowed because you will not have a taxable income to cover it.
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.
