How old is too old to take out an investment?

SHOULD a person buy an annuity at, say, 65?

An annuity is simply an income stream, which you purchase in exchange for a lump sum. They can have a range of terms and conditions, and you need to take advice to ensure that the one you buy is appropriate for your situation.

For example, if you take out a lifetime annuity, you need to decide whether it is indexed to inflation or payments are unchanged for the term of it.

My view is that it would be unwise for a 65-year-old to take out a long term annuity at this time because we are currently in a low rate environment. You also need to discuss issues such as what happens if you die prematurely. IF I sell the unit I live in to go travelling, do I pay capital gains tax? If so do I pay tax on the sale price or the net proceeds after the mortgage is paid?

I am almost 60 years of age and on a disability pension. How will this affect my pension? The sale price would be around $200,000, less a mortgage of $50,000.

As the property is your residence, it is exempt from capital gains tax. If capital gains tax were payable it would be levied on the net sale proceeds – the amount of the mortgage is of no consequence.

Once you sell the property you will become a nonhomeowner. The effect of the sale on your pension will depend on your total assets. If all you have is the sale proceeds, and a small amount of personal possessions, you should still retain the full pension. MY elderly sister owns a property worth $650,000 and receives the age pension. She has assets of $150,000 in a super fund and receives a fortnightly payment from this asset.

Her brother receives the age pension and will soon move in with his sister. He has no other assets of substance.

If his sister needs to move to an aged care home, will she be forced to sell her house to pay an accommodation deposit to the old age facility; or will the fact the brother resides there mean the house will not need to be sold as appears to occur when a “couple” is involved.

The exemption that can apply to the former home is based on whether or not a “protected person” is living there.

A protected person includes a spouse or dependent child but can also include a carer who has been living in the home for at least two years or a close relative who has been living in the home for at least five years, so depending on how long the brother has been living there, his role (and assuming he remains eligible for a pension) he will qualify as a protected person. Noel Whittaker is the author of Making Money Made Simple and other finance books. His advice is general in nature and readers should seek their own professional advice before making any financial decisions. Email: noel@noelwhittaker.com.au