Monica asks Noel Whittaker for feedback on how best to invest her nest egg.
Monica has worked hard to establish herself as a self-funded retiree and continues to be frugal. She asks personal finance guru Noel Whittaker for feedback on how she has managed her finances.
I am a self-funded retiree in my late 50s with a small income consisting entirely of rental income and bank interest. I have no superannuation. But, with a frugal lifestyle and by being very careful, I managed to pay off a house and have a reasonable amount in a bank account to pay for my retirement.
I usually earn around $18,000 and $25,000 per annum and generally have a small tax bill. I was considering putting my savings into a superannuation term deposit, so that the earnings are tax free when I am over 60. But I have done my sums, and with my meagre earnings a self-managed super fund (SMSF) is not viable.
Also, I found that I would be much worse off financially, as I would pay 15 per cent on my super earnings and, to add insult to injury, the interest rates through some funds are lower than what I am earning in bank interest.
I can't fathom why our Government treats older Australians this way. Why isn't all income tax free for Australians over 60?
A. As well as the 15 per cent tax on earnings, there would be at least one per cent in administration fees with your money in superannuation. Given that most superannuation funds invest at least partly in Australian shares, it may be worthwhile taking advice about simply putting part of your savings into a good share trust. You should get an income of at least 4.5 per cent, and good long-term capital growth, and you wouldn’t have the worry of fees, or even the death tax, as you would when your money is in superannuation.
As far as making income tax-free to all Australians over 60, there would be great difficulty getting that through Parliament given the increasing strains on government budgets.
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Noel Whittaker is the author of Making Money Made Simple and numerous other books on personal finance. His advice is general in nature, and readers should seek their own professional advice before making any financial decisions.
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