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Ask Paul: Can I turn my finances around before I retire in 10 years?

ask paul clitheroe retirement retire

Q. I am doing OK but not anywhere near what I had planned for this time in my life. I am a 55-year-old widow with a non-dependent 24-year-old son.

With my partner I own a home worth $900,000 with a $450,000 mortgage.

I have my own savings of $230,000 with very little super as I have been self-employed nearly all my life and, of course, meant to make contributions but never got around to it.

I run a small business as a sole trader with take-home income of $70,000pa. I have no other debts. I personally own shares worth $10,000.

I am getting quite worried that I will not be financially secure at retirement. I was thinking of investing in exchange-traded funds or a balanced fund for growth.

What would you suggest to boost my investments and savings to be in a better position to retire in 10 years? – Jane

A. You caused me to chuckle over my morning cup of tea, Jane, with your very real comment about meaning to add to super “but never got around to it”. That sounds like all of us with various aspects of money.

My view is that you should now correct this.

I don’t know what deductions you may have on your take-home income but any amount we earn over $37,000 is taxed at nearly 35%, including the Medicare levy.

You can put a maximum of $25,000pa into super and pay only 15% tax on the amount you put in.

This would give you, after tax, 85 cents in each dollar in investments in super rather than 65 cents on your take-home earnings in something like an exchange-traded fund.

It would be a good idea to chat to your accountant before proceeding but I think you should then simply go to a big, low-cost super fund such as AustralianSuper or Hostplus and build wealth in super.

You can choose your own investment options but with a 10-year view until you plan to retire, a growth option seems sensible to me.

Written by Paul Clitheroe

Paul Clitheroe

Paul Clitheroe AM is a respected financial adviser and Money’s chairman and chief commentator. He is chair of the Australian Government Financial Literacy Board, and author of several personal finance books. Ask Paul your money question.

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