I’m 64 but don’t plan to retire for another 3 to 4 years. I may reduce work to four days a week in 2016. So my questions are - at the moment my Super is 80% balanced and 20% conservative. How should I manage this in the next 3-4 years before retirement?
I currently rent where I live but have 2 investment properties I rent out. What is the best way to maximise the profit on these properties and perhaps buy something from the sale of both? eg when would it be best to sell the properties?
In the next 3-4 years is there anything I can do with $35000 in cash I have in the bank that simply offsets the loan I have for the units I have?
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A great set of questions. We see these kind of questions a lot with new clients, because their superannuation fund has never encouraged them to think about their retirement structuring.
Remember superannuation is not an investment, it is a structure, much like a family trust or a company. The investments you hold in superannuation are up to you (within reason). As you are over 60 years of age, you are now in the sweet spot to fully utilise the superannuation structure to hold your investment assets and, if positioned correctly, pay no tax for the rest of your life. In this respect we cannot control investment returns but we can control the amount of tax you pay on these returns.
As you near your point of retirement you should consider taking a more conservative asset allocation. A starting point is the 3 year cash rule, when you consider how much you need as an annual income, then look to hold at least three years worth of this amount in very secure cash and fixed interest. Without knowing your annual income requirement and superannuation balance it is difficult to give you any more guidance.
A good retirement structure would have all your investments in the superannuation environment, no debt and a small cash buffer in your personal name. Hence, I think you need to consider the position of your investment properties and consider your options in shifting the proceeds of these property sales into super (taking into account capital gains tax, contribution limits and contribution restrictions such as the work test). If you consider the proceeds of these properties could be invested in a nil tax environment, there is a good argument for selling them sooner rather than later.
Concerning the $35,000, it depends on the outstanding loan amounts, your income and current tax position. I would default to trying to achieve the structuring goal of trying to have all your assets in superannuation, no debt and a small cash buffer in your personal name – this will serve you best as a self-funded retiree.
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