Q. I am 60 years old and have just retired, although I may do consulting in the future to supplement our lifestyle.
We would like to have at least $75,000pa to live on.
My (second) wife and I own our $1 million home outright (joint tenants) and I have $667,000 in super while my wife has $25,000 in super.
We also own an investment property (joint tenants) worth $640,000 ($330,000 owing), which is rented for $650 a week.
We are a “blended” family with two adult children each.
In my sole name I have $1 million in a term deposit at 2.75% interest that is the part proceeds from the sale of the house that I owned before meeting my second wife.
For estate planning reasons I would like my son and daughter to be the beneficiaries of this money. Can you advise me on the best place to invest this money, and should I set up a discretionary trust with my children as the beneficiaries? – James
A. Interesting question, James. I would argue that the first issue is to ensure you have the $75,000 a year you need.
Your investment property is returning about $33,000 a year, so I would guess about $25,000 after expenses. Your joint super should comfortably be able to pay you a pension of 4%, so about $28,000. That would give you about $61,000 a year.
You could dial up the super pension to, say, 6% to get you to around $75,000 but you should have a long life in front of you and I would want you to seek professional advice to be comfortable your fund can sustain a pension at that level.
Your fund may be able to help you here. Naturally, any consulting income may fill this gap.
With your kids and estate, I really want you to see a solicitor and an investment professional.
My suspicion is you need testamentary trusts for your kids.
Equally, you may need the income from the $1 million for the kids to supplement your income, with the kids getting the capital.
In the long run, I can’t see a term deposit being the best investment option, so this is where the adviser steps in.