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Retiree dilemma

Discussion in 'General Property Chat' started by Valentino, 9th Oct, 2016.

  1. Valentino

    Valentino Active Member

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    NSW
    hi there
    My dilemma as a retiree: how to best utilize what we have (home and cash) to make us some more money to live on?

    I'm 75 and married 51yrs to a beautiful 74yo sweetheart. our health is ok for now but we would like to downsize from our home. Ideally avoid nursing home/over 55s places like the plague! But a small home on level land would be good. We live in Wollongong.

    Assets and Income:
    1. we fully own and live in our own 2-storey four bed home (val 550k).

    2. we have 300k cash investments and they are only earning 1.5% interest! It's terrible.

    3. We have more in long term funds earning 4.5%, maturing 2020.

    4. We get the full pension and it's based on our assets.

    IDEAS SO FAR...
    1. One idea is to buy a 300k unit to live in (pay it outright) and rent out our home and the rent would be about 500$ per week.

    2. Or spend 30k to turn our home into two dwellings and aim for $400 + $250 per week. I'm handy and could instal a kitchen and shower downstairs.

    3. Or also spend $x to build a shipping container granny flat in backyard and rent out all three if possible. Not sure on the law.

    Tax deductibility irrelevant - not working.

    All ideas welcome; we are really sweating because we are currently only earning $4500 IN A WHOLE YEAR OUT OF $300,000 invested! We were badly burnt by theGFC so we are not doing stock market.

    Thanks in advance.
     
  2. Joynz

    Joynz Well-Known Member

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    At what point will extra income affect your pension?
     
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  3. Propertunity

    Propertunity Exclusive Real Estate Buyers Agent Business Member

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    If you want to stay out of the share market the you'll probably have to develop a LOR strategy. Turning your home into 2 x residences upstairs/downstairs will be difficult for fire walls, electrical separation and noise transmission. Doing a granny flat is a good idea if your block suits it.
     
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  4. willair

    willair Well-Known Member Premium Member

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    I see a lot of people in your age group assets wise that have sold up everything bought a mobile home and just go from free camp too the next one..
    The Grey Nomads Forum
     
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  5. Marg4000

    Marg4000 Well-Known Member

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    At ages 75 and 74 you can probably safely look at drawing down some of your $300K capital. Even drawing $10K a year will only see it reduce to $100K when you are both hopefully in your mid- nineties but may make a big difference to your enjoyment of the next 20 years when you combine it with the full pension.
    Marg
     
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  6. Colin Rice

    Colin Rice Mortgage Broker Australia Wide Business Member

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    I think this ^^^^^ could work if you select wisely. You have increased your asset base (other than cash which decreases in value overtime). Negative is lack of liquidity.

    This ^^^^^ would be a lower risk option and can increase cashflow (which is what you need) especially if you are allowed more than one GF but would need to check with LGA first.

    Congrats on being married for 51 years to your sweetheart :)
     
  7. Intrigued_again

    Intrigued_again Active Member

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    $300,000 @ 1.5% if you draw down $32,500.00 per year the will last 10 years and $22,480.00 will last 15 years.
    How much is in the long term 4.5% maturing at 2020 account.

    and more importantly what happened with GFC, as all the above burns your capital
     
  8. Indifference

    Indifference Well-Known Member

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    @Valentino I'm going to say something controversial here within PC but only because of your circumstances (age, financial position etc.)

    I would not choose to lock up all your capital in property if I were in your position. The high entry/exit costs coupled with difficulty in drawing down on your capital should you need to, is enough for me to consider other options.

    You have 300k that's not even keeping pace with inflation, let alone providing any reasonable return. You also have 550k locked up in your home that unless you have a burning desire to leave as an inheritance (whilst only just getting by now) is a "partial" waste.

    I'd be looking to reinvest the 300k in a more liquid asset paying multiples of 1.5%, downsize the 2 story to a newish (new would really reduce stamps) & smaller single level home in the 350-400k range. That would give you circa 450k to invest, which at 4.5% like your other capital would give you ~20k per yr compared to 4.5k now. So an additional $300 /wk. The only issue is whether this affects your pension.....

    I'm more concerned with cashflow & although only in my 40s, I wouldn't even qualify for a part pension (for a single) & get not much as a couple.... the reason is not because of wealth (I'd likely be the poorest semi-retiree here by traditional measure ie. net worth) The reason is because I don't have much lazy capital compared to most. We live in a modest house with very deliberate purpose & that one thing accelerated our financial independence by at least a decade..... something to consider.

    Enjoy the journey

    Indi
     
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  9. MTR

    MTR Well-Known Member Premium Member

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    Now this is making sense.

    We are only here for a short time, give yourself the best life you can:)
     
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  10. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    Work out the various options and then work out how each of these will effect your pension.
     
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  11. Marg4000

    Marg4000 Well-Known Member

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    But also look at the overall result. You may lose some pension, but your actual net income may increase.
    Marg
     
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  12. Scott No Mates

    Scott No Mates Well-Known Member

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    @Valentino

    Option 1 - will probably lead to the loss of some/all benefits due to the mix of assets and income
    Option 2 - you still have to live somewhere and income will reduce pension
    Option 3 - building an accessible granny flat is a possibility but consider living in it and rent out the house.
    Option 4 - buy a more/equally expensive villa/unit and sell the house but you may lose some/all pension due to assets test (there may be stamp duty concessions available for downsizing)
    Option 5 - Sit down with one of the consultants from centrelink or your accountant/planner to determine what you can hold.
    Option 6 - review your investment mix and consider a managed fund for 25-30% of your savings noting your aversion to shares or other investment options eg commercial property syndicate.