Don’t do anything before getting advice

Stephen has decent assets and is about to retire but …

QI have recently reached the age of 65 and am looking at retiring shortly; my wife will continue working at least another eight years. We recently had discussions with a financial planner who recommended we become debt free and invest that pool of money. Becoming debt free appeals to us.

We currently have investment properties with money still owing. If we sold all our properties we believe we would have $1.1 million to invest. The planner’s recommendation is to invest that money and to aim at achieving a yield of 6%, generating a tax-free income of about $60,000.

Can you explain what a yield is and how it works? Is 6% realistic to achieve in a given year? And is it tax free and how is it paid to us (during the year or at end of year)?

I am also about to get a portion of my super that I am entitled to now and have been told this will be tax free. People have mentioned that I need to set up a specific pension account for this to go into, but it is going to be deposited into my usual savings account. Will this be okay? Finally, how do I go about locating a financial planner?

I have a bunch of concerns with what you have told me, Stephen. Selling all of your properties will generate a tax liability. It may well be that one or more of the properties is an excellent investment that can generate income. Equally, I do not want you taking money out of super without very solid advice to do so. I am 65 this month and

I am happy to tell you that our super, a very tax-effective vehicle, is a primary source of our retirement income.

In terms of a yield of 6%, I think what the adviser you spoke to means is the total return on any investments you hold. For example, you might have property returning you an income of 3%, a term deposit paying 1.5% and some shares paying 5% in dividends. These payments are referred to as yield. Over time the property and share investments would be likely to increase in value, so the idea you could invest $1 million and get a return of 6% when combing both capital growth and income is not unreasonable.

But I do not want you to do anything until you receive professional advice that you can trust. Does your super fund offer member advice? If not, I would suggest you contact the Financial Planning Association and ask for a list of CFP-qualified planners near you. Do not hesitate to have an initial meeting with several of these; it is essential you form a relationship with an adviser you can trust and in whom you have confidence.

The good news is that it seems you have built up a solid asset base, so take your time to get that working for you in retirement.