1 First question
Hello Craig I am 70 years old, mostly retired, and make $15,000 a year from part-time work.
I have $1 million in a respectable industry super fund pension account that pays out 5% a year. My 64-year-old wife has $800,000 in a top-notch industry fund and intends to work for an additional three years, earning $80,000 annually.
She has shares worth $500,000. Our own house will be downsized in four to five years, freeing up $500,000.
Although we are aware of our good fortune, we are unsure of how to proceed. A financial consultant we consulted recommended that we sell the shares over a three-year period in order to pool our super in a wrap fund. He makes the case that tax credits that are currently held by our industry funds should be returned to the wrap fund. Our total super expenses are less than the wrap fund's cost.
Another option is for my wife to remain in her fund until she retires, I add some extra money to her ATO limit, and she can sell shares when she stops receiving a salary (if she wants to), which would reduce her capital gains tax. I also visit the wrap fund. When she retires, she might decide to join.
Then there is SMSF. What course ought we to follow?
Both wrapping and industry funds offer benefits.
Most people's demands are satisfied by industry funds, which are typically inexpensive. They used to provide few options for investments, but many now offer a variety of options, such as shares and exchange-traded funds (ETFs).
Wraps provide more control over tax consequences, more transparent and extensive reporting, and even more investment options (foreign shares, unlisted investments).
Although wraps are more costly, they become more economical as your balance increases.
To be clear, when it comes to taxes, the tax benefits you receive from investing in a wrap are immediately applied to your account.
Saying that they are "retained" by an industry super fund is incorrect. When using an industry super fund, taxes are computed at the fund level rather than on an individual basis. Your balance should be net of any tax obligations since unit pricing already account for any taxes. However, the results are distributed among all members, and you have no personal control over the tax.
It may seem like a significant choice, and in some ways it is. Both choices, nevertheless, might still be suitable.
The things to weigh are as follows:
Variation in fees
The potential tax benefit of the wrap
Whether you want or desire the extra reporting and investments that the wrap offers
Whether you choose to continue working with the financial advisor
If you wish to keep your current fund, will the adviser feel comfortable working with it?
Do you want constant guidance, or will you only require reviews every few years if you keep things simple? The likelihood that you will require further guidance increases with the complexity of your portfolio.
I apologize, but there is not a clear-cut solution.
Only if you want to be actively involved and have even more control should you consider an SMSF. You might not be a good fit for this option.
Regarding the various tactics discussed, it would seem reasonable to sell shares over a period of years and/or after retirement in order to lower CGT.
Once more, it appears prudent to put the share proceeds and any remaining property funds (after downsizing) into a very tax-efficient vehicle like superannuation.
Earnings and payments are tax-free once a person is enrolled in a pension.
2 Question
During COVID, we lost our business [spent my superannuation]. My wife's super is barely around $200,000.
What would happen if we did not make any plans? Despite being a solo proprietor, I do not make enough money to create a super fund!
Having your superannuation linked to your business is a high-risk strategy—not that you want to hear this right now.
Although it may be a profitable investment, the dangers are increased, and you run the possibility of losing both your business and your retirement funds at once.
The adage do not put your eggs in one basket applies here.
Right present, the options are:
Work longer than you had planned.
Seek out better-paying positions
Reduce your lifestyle to make more money to donate to super
Reduce your expectations for retirement and be ready to live on less.
all of the aforementioned.
We are fortunate to have a respectable age pension in Australia Although it does not offer an opulent lifestyle, it does offer a solid safety net to meet the necessities.
67 is the pensionable age. You should at least attempt to work till this age if you do not have much super.
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