Is it worth doing some renovations before downsizing?

3 months ago 19

I am 63 years old, widowed and own our family home. I have $300,000 in super and plan to work for a few more years. I plan to downsize eventually because the house is far too big for just me. I only have a few thousand in savings, so when the time comes to sell the house, I won’t be able to finance the repainting and re-carpeting that will be necessary. I can’t imagine that I would be able to get a mortgage or even a loan in my late 60s. Are there any other options?

I suggest you first speak with your real estate agent to check that it is worth your while getting the place repainted and re-carpeted. It would be a real shame if you got these works done, only for a developer to purchase the place and bulldoze it. Alternatively, purchasers might prefer to buy unrenovated so they can decide on colour schemes.

Before selling, check with your real estate agent if it is worthwhile repainting.

Assuming the advice is to get this work done, however, your super fund will need to be the funding source. Once you reach age 65, you can access your super whether you are working or not, so if you can hold out until then, this is a straightforward solution.

Alternatively, there is the potential for you to have access to your super now if you had a period where you were not working since turning 60. As an example, perhaps you finished up with one employer and then started a new job a few weeks later. This would be enough to make super accessible for you because a condition of release has been met.

Once your home is sold, you can use the downsizer rules to replenish your super by up to $300,000, plus you have access to the normal concessional and non- concessional contribution limits up to age 75.

We’re in our mid-50s with a mortgage of $70,000 and about $100,000 in cash. Our income is mixed—my part-time job ($70,000) is secure only for 12 months, and my side hustle ($30,000) plus my wife’s self-employment income ($90,000) are both variable. We have no other debts, but limited liquid assets outside this cash. Should we use some of the cash to pay off the mortgage or keep it as a buffer in case income drops?

Thanks for your question. I would park $70,000 of cash in an offset account to completely negate your mortgage. The funds remain accessible, giving you the flexibility to manage the uncertainty associated with key elements of your income, but meanwhile you save whatever the interest rate is on your mortgage, risk-free. Retaining the funds in the bank will almost certainly produce a lesser return, particularly once tax is paid on the interest.

When in pension mode with multiple fund options, is it best to withdraw from bonds and rebalance once a year, or have each pension payment draw pro-rata from each investment option?

For a pension with a bespoke mix of different investment options, we would typically set aside a year’s worth of drawings in cash within the pension fund, and have pension payments drawn from there. We would then replenish this cash account annually, sourcing the required monies from funds depending on the prior year’s performance so as to return the portfolio to your target level of risk. For example, if the international share fund had a cracker of a year, then we’d draw from there to provide for the upcoming year’s pension payments.

Paul Benson is a certified financial planner at Guidance Financial Services. He hosts the Financial Autonomy podcast. Questions to: [email protected]

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.

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