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Ask Paul: Help, my war injuries could force me out of work

ask paul clitheroe money magazine army war injuries

Q. I am 50 and due to my health not being in great shape I have probably eight to nine years left in work.

My wife is 48 and works part-time on $26,000 a year and is worried about our situation.

We own our home, which is worth $500,000, and have $220,000 in term deposits and $270,000 in my super, into which $730 of salary sacrifice and employer contributions go each fortnight.

We have an Australian shares managed fund worth $185,000 with Colonial First State.

I earn $70,000 in my current job, and have an army pension of $25,500 and a tax-free Veterans Affairs pension of $11,700 a year with a gold card.

Hopefully, TPD will be an option when my war-caused injuries are too hard to deal with.

Please provide guidance as l have worked hard all my life and l don’t want to make mistakes in the next five to eight years. – Darryl

A. Darryl, my view is that you should play it safe.

Your health is not great but you have a very solid asset base in your house, $220,000 in safe term deposits and some $450,000 in shares with Colonial and your super fund.

Then you have your army pension and a Veterans Affairs pension.

It looks as if you are maxing out your pre-tax contributions to super, which can be up to $25,000pa.

Extra salary sacrifice super contributions by your wife will not be that valuable as she is a low-income earner. Super, however, is a good place to keep your savings and you could consider adding some as after-tax contributions (ie, your own money).

Equally, I have no problem with you building up your managed fund with regular contributions, or adding to the term deposits. This is a risk-based decision.

In the short term, shares are riskier but likely to provide higher long-term returns.

With a fully owned house, your pensions, term deposits and a good amount in super and shares, you are really in a sound position. I’d just keep building your investments on a regular basis.

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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  1. Darryl, would you be entitled to a TPI (total and permanent incapacity) pension from the government if your “war caused injuries” cause you to cease work before normal retirement age? Or is that what you mean by army pension/ veteran affairs pension. You can read a bit more on the link below.

    I have clients with TPI pensions and the ones I have seen are quite significant ongoing payments payable to you or your spouse for life. TPD insurance on the other hand is a different thing and I suggest if you have insurance and believe that injury will force you out of the work force in the future then it might be good to hold onto those insurances but worth checking they don’t exclude the war caused injuries.

    http://clik.dva.gov.au/compensation-and-support-policy-library/part-4-disability-compensation-eligibility/41-disability-pension-eligibility/416-special-rate-tpi-or-tti-eligibility

    All the best,
    Tony

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