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Ask Colley: Timing your retirement

In the last Ask Colley edition for 2017, Graeme Colley, Executive Manager at SuperConcepts, answers "When do you know it’s time to scale back on work and start living off your superannuation?"



Q.

When do you know it’s time to scale back on work and start living off your superannuation?

A.
You may think that at this time of year the sharks come out specially for holiday makers.  Well, you’re right about that, but in my case they usually have two legs and arms, may have grandchild in tow and thinking of retiring.  There’s nothing like meeting the couple from down the road on holidays when they’ve had time to think about their financial future.  Let me tell you about Barry and Liz.

I ran into Barry on his morning jog on Seven Mile Beach. ‘Great to see you Graeme’, he says.  Nice bloke but that’s a warning sign when he uses ‘Great’.  ‘Liz and I are up here for a week while the shop’s shut’.  Barry owns a café which must be going OK as he shuts for three weeks every January without fail.  What a co-incidence I thought, I’m here for a week while my (superannuation) ‘shop’ is shut too.

‘I know you’re here on holidays,’ says Barry ‘just a quick question’...that’s code for ‘it’s really long and complex’.  ‘Sure Barry, not a problem’ I say.  I’m really thinking whether to pick up the pace on the jog but I know he was some type of beach sprint champion in his youth.  ‘ ‘Well, mate you know I’m 57 and Liz and I are thinking of cutting down on work.  We have about a mill (Barry talk for $1 million) each in super and I wouldn’t mind using it to buy a house or something like that we can retire to. What do you think?’

‘Well Barry, that’s not as easy as it may sound.  There’s the question of whether it’s a good investment in the first place which includes rent, expenses etc.  Then you need to think about possibly gearing the property through the fund.  But there’s things you can’t do.’  ‘You can’t stay in it when your super fund owns it, the fund can’t claim your travel expenses to mow the lawn and if you think it can stay there after you’ve retired – how’s it going to provide a pension to you and Liz?’.  All good points, says Barry.  ‘Maybe I should put the café in the fund’.  ‘Sure Barry, it can provide some tax advantages and you can rent it from the fund on a commercial basis. You can even gear it if don’t have the right amount in the fund’.  ‘Maybe I should think about that, as it’s probably a better idea’ Barry responds.  ‘Why don’t you and Cath (my partner) come around for dinner so we can flesh it out’.  It’s a pity Barry and Liz are great cooks as I may have had second thoughts, and off we trot.  

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