You note that when your new $200,000 contribution is subject to deeming, you will exceed the $92,416 cut-off limit for the CSHC. However, if that money has been in cash or shares until now, it would already have been subject to deeming, so placing it into a super fund should not affect the card’s income test.
As a rule of thumb, I would not recommend selling shares to finance the contribution, assuming your strategy has been to buy good shares and hold them. However, if you are more of a share trader, or simply unwilling to ride through the latest sharemarket downturn, I should warn you that I expect more market falls ahead as interest rates are ratcheted up.
When the Reserve Bank recently lifted official interest rates from 0.1 per cent to 0.35 per cent, its chairman pointed out the so-called “neutral rate” is 2.5 per cent, so there are a few more rate rises likely in the short term.
I also think 2.5 per cent is too low to combat the level of inflation being seen.
My wife and I are 75 and 74, respectively. Our two children are financially secure and would only require assistance in an emergency. We operated our own manufacturing business until retiring some 12 years ago. About two years ago, we downsized, selling our home, business and factory, and moved in to an apartment. We are now debt-free and have substantial term deposits in St George and Bendigo banks, earning almost nothing in interest. Our share portfolio returns about $50,000 a year. What are our investment options to obtain a steady return to live on? My wife prefers buying a rental property, but I feel the returns are poor despite potential capital gains, which do not interest me much. I would prefer putting the money into a secure managed investment fund, capital guaranteed if possible. What are your thoughts? D.N.
A property would return more income than a capital guaranteed managed fund but then, given rising interest rates, I would expect it to lose more in capital than you gain in interest.
I see the best strategy over the next six-to-12 months as seeking a financial foxhole.
However, both property and shares are overpriced and nothing corrects these like increases in official interest rates.
I agree that the best set-and-forget strategy can be investing across a number of diversified managed funds, but even they can show temporary negative returns at times like this.
Hunker down with a six-month term deposit and see what is on offer afterwards.
- Advice given in this article is general in nature and is not intended to influence readers’ decisions about investing or financial products. They should always seek their own professional advice that takes into account their own personal circumstances before making any financial decisions.
If you have a question for George Cochrane, send it to Personal Investment, PO Box 3001, Tamarama, NSW, 2026. All letters answered. Help lines: Australian Financial Complaints Authority, 1800 931 678; Centrelink pensions 13 23 00.