We’re 71 with no super. Should we sell our house and invest the proceeds?
We are a couple, both 71, currently receiving a full age pension of approximately $890 every fortnight. We have no retirement savings and only around $12,000 in the bank. We are considering selling our home for approximately $710,000 and are considering two options. The first is to downsize to an apartment worth about $550,000. The second is to sell the home and keep the proceeds in liquid investments, such as an annuity or account-based annuity, to avoid the stress of purchasing and maintaining another property.
Our children prefer the second option, especially because I have been a bladder cancer survivor for the past 12 months and they are concerned about our future care needs. Our main concern is how these choices will affect our old-age pension, whether it can be reduced or cancelled.
I think your main concern should be finding accommodation that suits your lifestyle and ensures you have enough capital to last you the rest of your life. As a non-homeowning couple, you can have up to approximately $1.34 million in assessable assets and be eligible for part-age pension with all the valuable privileges that come with it.
If you move to a condo or retirement lifestyle community, maintenance and repairs will become much less of a problem, while also providing you with security and certainty of tenure. You also avoid the stress of investing all your assets in markets where values and income can fluctuate.
Based on the figures you gave, buying a $550,000 flat would almost certainly allow you to maintain a full-age pension or something very close to it. Even if you sell the house and continue to invest the proceeds, you will still remain well below the non-homeownership means test limits and be eligible for a part-age pension.
Take the time to explore both options. This is a lifestyle and health decision as well as a financial one, and it is wise to seek expert financial advice before making a final decision.
Where there is more than one beneficiary, problems may arise if one wishes to hold shares and the other prefers cash.
My main residence is in Melbourne, my investment property is on the beach. In November 2024 I rented Melbourne and moved to the coast permanently. I plan to sell the flat in Melbourne next year to help out with the kids. Will I have to pay CGT as it’s a two year lease in Melbourne?
Julia Hartman of Bantacs says you can choose to keep a Melbourne property within your main residence exemption for up to six years while it’s rented, so no CGT will be payable, provided the property has always been your main residence.
Of course, during this period you cannot cover the beach house under your primary residence exemption. The important thing is to ensure that the beach house falls within the principal residence exemption at the time of death.
If it is not generating income, your heirs will inherit it at its market value at the date of death, effectively eliminating the CGT liability. They then have up to two years to sell without triggering CGT. For periods exceeding two years, CGT calculation starts from the market value on the date of death.
If you rent it but still treat it as your main residence under the six-year rule (for example, while in aged care), it does not count as generating income for this purpose.
I’m 41, female, live alone and make about $150,000 a year, and I don’t expect my salary to increase. I bought my house last year and currently have a $400,000 mortgage with $50,000 in savings sitting in the offset account. I have no other debt, my retirement balance is $230,000 in a defined benefit fund, and I have an old, used car that’s dying. After living expenses and mortgage payments I can only save $5000 a year and I am currently adding that to my offset account.
As I approach my 40s, I’m starting to worry that I’m not doing enough to prepare for retirement, but I’m also conscious that as a single homeowner, I need cash for short-term expenses. Given my situation, would it be wiser to prioritize building the balancing balance, sacrificing more of the pension, or investing outside of retirement (in stocks or ETFs, for example), and what strategy might give someone in my position the best chance of improving their long-term financial security?
I think prioritizing the offset account is a solid strategy because you’re effectively getting a guaranteed return on capital equal to your mortgage rate (around 6 percent) while keeping the money fully accessible. This flexibility is important given your situation.
Once you have a comfortable buffer in balance, you can consider gradually increasing the salary sacrifice to your pension to take advantage of tax deductions. Since your defined benefit fund already provides a solid foundation, there is no urgency to divert limited cash flow from accessible savings.
As you get closer to retirement, you may want to shift your focus to increasing your retirement income, at least to maintain a decent balance on your mortgage.
If shares are left to beneficiaries under a will, is it generally better to transfer the shares directly into their names rather than selling them within the estate? My understanding is that any capital gains tax is generally deferred until the beneficiary eventually sells the shares. Is this true and are there situations where selling shares before death might actually be a better option?
There are a few issues to consider here. The first step is to ask the beneficiaries what they would actually want to do if they acquired the shares, as any embedded capital gains tax liability would normally pass through with the shares.
This might not worry a beneficiary who plans to keep them long-term, but could become a problem for someone with a high marginal tax rate who plans to sell them quickly.
Where there is more than one beneficiary, problems may arise if one wishes to hold shares and the other prefers cash. In such cases, it may be worth considering whether some of the shares should be sold while you are alive, especially if you have a lower marginal tax rate now than beneficiaries may face in the future.
Every estate is different, so the best strategy will depend on the beneficiaries, their tax position and the structure of the estate.
Noel Whittaker is the author of: Retirement Made Easy and other books on personal finance. Questions: noel@noelwhittaker.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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Noel Whittaker, AM is the author of Make Money Made Simple and numerous other books on personal finance.Connect with: X or email.
