I am 58 and my wife is 56. We own our house worth $1.1 million and I have super worth $700,000 and no longer work. My wife, who still works, has super worth $140,000 and has a salary of about $40,000. Our long-term plan is to downsize from our four-bedroom home to a three-bedroom villa in the same district over the next five to 10 years. Given that there would potentially be less choice of villas that would suit our needs we are considering buying one in the near future then renting it out until we are ready to downsize. We have savings of $200,000 to use as a deposit but would require a loan of $700,000. We don't think we could service the loan through the rent and my wife's income. What are the risks if I were to use my super to buy the villa and when we sell our house I could recontribute the proceeds back into my super? W.R.
You would be risking your bird in the hand (your house!) for two in the bush. For example, there is the amount of construction going on and we could be entering a period of oversupply (of apartments, admittedly, but villas often appeal to developers of medium-density housing). If so, you might find a greater choice of villas, rather than less.
![Superannuation is a safe place to keep your cash if you have a partner who gambles.](/web/20170214161345im_/http://www.smh.com.au/content/dam/images/g/s/h/w/z/q/image.related.articleLeadwide.620x349.gu9fzp.png/1486676368979.jpg)
Other warnings indicate that the interest cycle is bottoming, or may have bottomed, so if you take a variable loan, you might find yourself paying more than you had bargained for. It is entirely possible to see mortgage rates back about 7 per cent to 8 per cent in three to five years and people buying a house now should "stress check" their finances to ensure they can afford higher rates.
Finally, there are the unexpected "black swan" events (so called because, in the past, Europeans simply knew, for certain, that all swans were white. Then they landed in Australia and thousands of years of certainty were blown away!) Looking back, you'll probably find that your life has been shaped by unexpected events, and will probably be so in the future. It could be a Lotto win, or it could be a serious accident or illness.
You seem comfortable at the moment and can possibly live on your wife's income without touching your super. Buying a $900,000 villa would drain all your savings, while you would pay 15 per cent tax on the taxable component of your super in excess of $195,000 if withdrawn as a lump sum under age 60. Also, new rules from July 2017 make it difficult to recontribute $700,000.
Not a good idea, IMHO!
My brother Michael, 81, is in an aged care facility and classed as low care. My two other brothers and I are joint powers of attorney. Michael paid a bond of $415,000 when entering in November, 2011, and is paying the following fees: basic daily care – $48.44 a day, set by the care provider; income tested – $76.64 a day ($27,974 a year) set by the Australian government. He is a fully funded retiree with total assets approaching $4.5 million, depending on the ASX sharemarket, which includes his vacant home unit in Hornsby (sometimes used by interstate family members), along with shares and bank savings. Your column November 27, 2016, mentioned a maximum means tested fee of $26,041 and a lifetime cap of $62,499. With these amounts in mind, is Michael being overcharged by the Department of Human Services regarding the income tested fee and could you explain where the lifetime cap comes into play? Unfortunately, I do not use the internet. E.B.
Your brother falls into the category of aged care residents who entered care before July 2014, when the rules changed and thus retain their old system of fees for as long as they remain in the residence. The maximum annual means tested fee (which covers both income and assets) I mentioned, and the lifetime cap, apply only to residents who enter care after June 30, 2014.
Your brother's basic daily fee and his income tested fee are established by the Department of Human Services. The only fees that could have been set by the aged care facility was an extra services fee.
Generally speaking, aged care fees are higher for post-2014 residents than for pre-2014 residents such as your brother. If, at a later stage, he needs to enter a facility with more intensive care (what used to be called "high care" but the term, and "low care" have been officially abolished), you will need to do some research.
If your brother remains in the same facility, then it is likely he will remain as a pre-2014 resident but you should discuss this with the management.
Similarly, if he moves to another aged care residence, that facility may agree to accept him as a client with fees established under pre-2014 rules. However, it is not required to do so and may stipulate that all new entrants must be charged under post-2014 rules. So, again, you will need to make inquiries ahead of time and possibly negotiate. For more information on the rules, you can call the government My Aged Care hotline on 1800 200 422.
I am 68 years old and live with my long-term de facto wife, 62. I have two adult sons from my first marriage who cause me concern. One is married, the other single, both with no children. I hope to leave a significant amount of money to them after my death. My total super is $1.095 million, I have $59,000 in an ING account and this year I expect to earn $60,000, working part-time. Our house is owned "tenants in common", valued at about $1.3 million. While I do not have a mortgage, my wife does, owing about $370,000 to the Bank of Queensland but my name is on the mortgage. The question is where to from here? Should I buy a block of land and build three townhouses – one each for my sons, the other for sale or rent; or buy the house next door – it burnt down earlier this year – and renovate it, then sell my existing house; or buy a Defence House. I should say that my wife is bipolar and hence is prone to spending a lot of money, including punting. She is a full-time TAFE teacher, but the sword of Damocles hangs over her head with the threat of retrenchment. Finally, my wife's 88-year-old father lives with us in a granny flat. He has no assets due to poor money management and obsessive punting. What do you suggest? J.C.
Unless you have been a property developer in the past, I suspect you would be risking what is now a comfortable life, especially if you build houses for your sons and they are unable to pay.
You will possibly need to share some of your income when your partner stops work as your savings will prevent her from obtaining an age pension. And if she is unable to keep making mortgage payments, you will be required by the bank to step up. With your name on the mortgage documents, the debt is legally yours. It looks as though you will need all your money for retirement.
Keep your money in super where it can be safeguarded from any hands that might want to feed some or all of it into the pokies.
If you have a question for George Cochrane, send it to Sunday Money, PO Box 3001, Tamarama, NSW, 2026. All questions answered. Helplines: Financial Ombudsman, 1300 780 808; Centrelink pensions, 13 23 00.