Paul’s verdict
The lower tax rate will give you more money to invest
Well, Raj, I can only agree it is a tough time to be seeking work, but presumably a good time to have sold your business. I also think that having run and sold a successful business you have practical skills that are sorely needed in these tough times.
Thank you also for your kind words about Money magazine. We know we do not have a crystal ball, but we do our best to not get panicked by the stampeding crowds in a boom or a bust and to keep our commonsense approach. Speaking of commonsense, you and your wife have built a very good financial base. We clearly have a strong common belief that owning your home before retirement is a key strategy. Having a valuable home that is effectively paid off, as you have $50,000 left on your mortgage and $85,000 in your offset account, is a great achievement.
Sticking with property for the moment, your investment, shared with your brother and his wife, also makes sense. You have good equity in this property and I have no doubt you have chosen to buy in a strong growth location. Sure, its value if you had to sell would be down from its peak, but in the long term with a growing population a well-located property should be a good asset.
Super is the place I would like to see you work on next. Your wife is already topping up by $200 a week, an excellent decision. Her balance between growth and conservative is very personal and based on her view of investment risk. At 46, though, I do wonder if she might use the market downturn to move more towards growth. Your super portfolio is in effect a growth fund, but at 51 you are in super for the long haul and I do believe in history, which shows that a sensible level of risk does produce higher returns over the long term.
We are in agreement that the $85,000 in your offset account should stay there until you find a new job. It is an excellent safety buffer.
Once you find a new job, consider salary sacrifice as your first goal. Topping up super is such a powerful wealth-creation plan. Assuming your new job pays the average wage of $82,000, you would be getting around $8000 into super from your employer. If you topped that up to the maximum $25,000, you would be adding some $18,000 to your employer’s contribution.
On your income of between $37000 and $90,000, including Medicare levy, you pay 34.5% tax. But salary sacrifice tops up your super with only 15% tax. So with that $18,000 you could have it in your pay packet. After tax this would be around $11,800. But put it into super and after the 15% tax you have $15,300 invested.
Here we do not need to be rocket scientists. You could use the $11,800 to buy shares or use the $15,300 in super to buy shares. Obviously, having the extra $3500 invested each year will give you more wealth at retirement.
With your $85,000 you could indeed buy a share portfolio in your own name, though I would suggest you keep some emergency money in the offset account. Prices are way off the peak and in the short term may get better or worse. This all depends on our recovery from Covid-19. But buying good shares and holding them for a decade or longer is a good plan, so I also support this idea.
These are strange times, but you are in a really solid position. So I think your plan to do what you are doing now, then once you get a new job to start topping up super and invest some of your offset balance into shares, makes a lot of sense.
1. The English Game (Netflix)
An original Netflix story about football and the beginnings of the FA Cup. This isn’t just a mini-series for football fans; it’s about class struggle, fairness and putting on a good game. It’s set in the gorgeous Yorkshire Dales, houses and mining towns, including Saltaire, Broughton Hall and Skipton.
2. The Durrells (Foxtel Go)
This series is based on the books by Gerald Durrell (My Family and Other Animals) and set on the idyllic Greek island of Corfu before World War II. Set in a small village, surrounded by animals, glorious scenery and food, it really transports you back to what seems like a more innocent time – it would be wonderful to escape there now.
3. Killing Eve (ABC iview)
A contemporary spy drama set in Tuscany, London, Paris, Berlin, Bucharest and more. The thriller centres on Eve Polastri, an MI5 operative, and Villanelle, a deadly assassin. It follows them around these exotic locations as they play a game of cat-and-mouse. As well as the stunning locations, there’s Villanelle’s killer wardrobe.
4. Les Norton (ABC iview, Google Play, Amazon)
Closer to home and set in the 1970s, this is the story of Les Norton, a country boy who comes to Sydney to be picked up as a professional rugby league player. To make ends meet he starts working as a bouncer in a Kings Cross gambling den and thus becomes mixed up in the seedy underworld. It’s a nostalgic trip back to an earlier Sydney.
5. Shetland (Netflix/Foxtel Go)
Set in the far-flung islands off the Scottish coast (and at the time of writing untouched by Covid-19), this series is a gritty police drama enacted with the laidback style and friendliness of a small community. It is framed by stunning countryside and water views. The location was voted Lonely Planet’s Best in Europe 2019, and a visit through this smart series is as close as we’re likely to get for some time. Five series have now been made.
6. My Brilliant Friend (Foxtel Go/Amazon Prime)
Based on the best-selling novels by Elena Ferrante, the Italian series perfectly captures Naples and surrounds starting in the 1950s. There are visits to the island of Ischia, which makes me regret going to Capri instead on my last visit. The town square, the tenement buildings, the beach – it’s refreshing to see this region filmed so lovingly.
7. Unorthodox (Netflix)
The story of a woman who escapes her Jewish Orthodox life in Brooklyn and goes to Germany. This shows a different side of New York – one usually reserved for those of the faith – and Berlin in the 1980s. It’s unusual travel, not for any glamour but for an insider’s view. Worth the journey for some new insights.