Question 1

I love your articles and I always look forward to reading them. I am turning 65 this year. I have $550k in a transition to retirement account and $350K to accumulation account. I am still working full time with a salary of $130,000. I salary sacrifice $1000 per fortnight to super. I am thinking of buying an investment property from my transition to retirement account when I turn 65. And just let my accumulation account for my super continue. Is it a good idea?

When you turn 65 your transition to retirement pension will automatically convert to a regular allocated pension and you then have the option of withdrawing all funds should you wish.

Whether it’s a good idea to use those funds to buy an investment property will depend on a few things.

• Whether the $550,000 will buy the property you are after, or whether you will also borrow to purchase the property
• That you have the property continually rented out with a reliable tenant
• What rent you will receive
• Capital growth expectations
• Costs involved in the property upkeep
• Other costs, such as real estate fees, or whether you wish to take a more hands-on approach.

Having a large portion of retirement savings tied up in one asset does increase your risks.

The property may very well outperform your super but you need to be aware that this is the riskier option as ongoing expenses/poor growth/tenant issues will have a major impact on your portfolio, as more than half is just in one property.

You also can’t sell a portion of your property, i.e. sell some bricks or just the kitchen. If you need access to the money you must sell the whole thing.

If you are confident that the property you have chosen will achieve growth and you are not concerned about the time and costs of holding a property, then this may be right for you.

However, you should also consider alternatives, such as leaving the funds in an allocated pension or transferring the funds back to your accumulation fund and combining it with your $350K.

You could then continue to build on your $900K super through salary sacrificing and commence a significant, hassle-free allocated pension once retired.

Question 2

I am 74 years of age and fully retired. I have an income stream pension through my super fund. Am I able to make/add a non-concessional contribution to my super income stream account before I turn 75?

You can make after-tax, non-concessional contributions to super before you attain the age of 75 as long as you are eligible to contribute under the total super balance cap.

However, the contributions have to go into a regular super account.

They cannot be made directly into an income stream.

If you don’t have a super account, they are easy to set up and the fund of your choice can assist.

Once you have the money in super, you can then roll over (move back) your income stream account and combine it with your super, to commence a new pension.

I know the above sounds like a bit of a hassle but, unfortunately, that is the current process.

Some super funds (like AustralianSuper) are currently lobbying the government to allow for contributions to be made directly into an income stream.

Let’s hope they have some success with that proposal.

Question 3

My husband is on work compensation and has a defined benefit super account. He is 58 and the compensation payment goes down to 75 per cent of his wage soon. He has another super account aside from the defined benefit one. Can he do a transition to retirement from the other super account when he turns 60 while still receiving the compensation payment from work to help pay down our mortgage?

Yes, once he turns 60 he can commence a transition to retirement pension from his super.

Under this, he can draw down a maximum of 10 per cent of the account balance each year.

Before commencing the pension though I would check with whoever is paying the compensation payments that receiving an income from super won’t affect his compensation payment.

I would suspect not, however, it’s best to check before commencing.

Craig Sankey is a licensed financial adviser and head of Technical Services and Advice Enablement at Industry Fund Services.

Disclaimer: The responses provided are general in nature, and while they are prompted by the questions asked, they have been prepared without taking into consideration all your objectives, financial situation or needs.

Before relying on any of the information, please ensure that you consider the appropriateness of the information for your objectives, financial situation or needs. To the extent that it is permitted by law, no responsibility for errors or omissions is accepted by IFS and its representatives.