Inherited 1.6 Mil. How to Secure My Family Future

Ljohndough2020 on 27/09/2020 - 08:39
Last edited 27/09/2020 - 13:04

So I've just inherited $1.6 mil. How should I diversify my money to ensure my family future? I don't believe in financial advisor as "if they're so good, where are their yatch?"

Current financial position:

  • Cash inherited: AU$1.6mil

  • Cash saved: AU$200,000
    All cash assets are currently sitting in an offshore account with an annual interest rate of 7% for … tax purposes.

  • Shares in Commsec: $60,000

  • No house, Renting atm.
  • No other debt.
  • Lost job since April.
  • 1 wife 2 kids. I'm 29 yo and kids are 3 and 1.

Living in Auckland but looking to move back to Sydney when their border opens up.

Why asking Ozbargainer, because we're frugal with our money. Also I've been a longgggggg time lurker.

I'm thinking we need a house, but won't go and spend the whole lot on one house and that would be silly. What % should a house take up in my case but still have enough cashflow from the interest and dividend for a future proof recession?

Financial

Comments

      • netjock on 28/09/2020 - 18:26

        You can be guaranteed super concessions will be more restrictive. Used to be 50k allowance a year. Now with COVID19 debt the government will be sniffing around for money.

    • Zachary on 28/09/2020 - 19:37

      I believe you said your family income was ~150k-180k? Thats enough to live off.

      I think that was just him and he lost his job so it's basically $0 income right now….

      • johndough2020 on 29/09/2020 - 05:05

        not exactly $0 as wife still works but yeah.. no where near what it was!

  • LFO on 28/09/2020 - 17:31

    I'm thinking we need a house, but won't go and spend the whole lot on one house and that would be silly.
    …
    offshore account with an annual interest rate of 7%

    Do your numbers about buying a home (a dwelling that you'll call home):

    In interest alone you might make more than enough to cover rent payments.
    Have the gut feeling you might prefer to lease whatever you fancy at that particular stage in your life (family) and freely move as needed, as wanted

    1.6 million will not secure your family future.
    With frugal living will last forever, spending will go in less than 18 months.
    It is spending, not having.

  • vroomkroom on 28/09/2020 - 19:04

    Buying a house should be first of the cards but if you are not sure then buy investment property. If you play safe, you probably can set your self for retiring in your 40s. For me retiring mean not hanging up your boots but willing to do a job even if it does not pay. Everyone's situation is different, so you will need to educate your self or get professional help.

  • [Deactivated] on 28/09/2020 - 19:33
    +1

    Op is gone wont be back

    • CalmLemons on 28/09/2020 - 19:40
      +1

      yep. johndough.

      come on.

      what degenerate asks a forum filled with people who waste their time trying to find bargains to spend money. lol

      • capslock janitor on 29/09/2020 - 00:36

        yeah we get excited over $2 socks

      • [Deactivated] on 29/09/2020 - 08:24

        people who come here to save 4cents a litre on fuel.

    • johndough2020 on 29/09/2020 - 05:04

      hi!

  • screensaver on 28/09/2020 - 19:44

    You could buy a brand new house and land package, the goverment has 3 subsidies going for first home buyers, 40k? free money

  • capslock janitor on 29/09/2020 - 00:39

    How do I set up an inheritance like this for my children?

    • screensaver on 29/09/2020 - 03:15

      life insurance

      • leiiv on 29/09/2020 - 16:02

        Most life insurance will only cover until 65-ish. If you live a long life, that is not an option.

  • kevsta on 29/09/2020 - 07:02

    Buy a couple of houses in NZ, live in one, rent the other, build granny flats at back and rent out as well.

    • johndough2020 on 29/09/2020 - 07:54

      have you not seen Auckland's house price? It's just as expensive as Sydney !!

  • hero000 on 29/09/2020 - 08:06

    I got 1.6 millions Vietnamese Dong when I convert my total savings to other currencies. Even it gets more interesting when converted to Zimbabwe $$.

  • pformag on 29/09/2020 - 09:38

    Short TSLA

    • whooah1979 on 29/09/2020 - 09:52
      +2

      Shorting TSLA is extremely risky in this environment. The TSLA army are zealots like AAPL fans. Both stocks are driven by hype. One could easily get liquidated if word got out of an impending short.

  • abuch47 on 29/09/2020 - 09:46

    proof we need a federal ICAC and a deathtax.

    • netjock on 29/09/2020 - 11:55
      +2

      proof we need a federal ICAC and a deathtax.

      ICAC yes. Death tax no. So you've worked all your life, paid income tax then invested after tax money. So tax it again just because you have to die. If death was optional like buying an expensive car (luxury car tax) then yes.

      That is like having window tax, look how that worked out. It is hilarious.

      • abuch47 on 29/09/2020 - 13:30
        -2

        yes as it stops wealth hoarding the sole issue of the world

        • netjock on 29/09/2020 - 14:21
          +1

          You might find it as a disincentive to not work just enough to live pay check to pay check and then fall back on the tax payer for the pension.

          • abuch47 on 29/09/2020 - 23:15

            @netjock: Many of the richest do already. Asset hiding is well known.

            • netjock on 30/09/2020 - 00:07

              @abuch47: As you might be aware the problem is less to do with the rich but more to do with erosion of the tax base if every man starts to evade tax.

              That is why ATO can only do selected audits and choose to make an example of a few to keep everyone else scared.

              I am for higher taxing the rich.

              Inheritance tax will also hit the little guy. For example in the UK inheritance tax is on about AUD$1.2m+ that means even blue collar workers might get caught if their assets appreciate enough.

              What you say just sounds good as a sound bite but it is basically double taxation. Basically doubling GST will do the same job.

              • abuch47 on 30/09/2020 - 07:49

                @netjock: sure but it doesnt have to be set that low and there are other ways to go about it reducing asset holdings for the middle class. anyone passing with 1.2 in pension/holdings is not low income and that is the point no matter what dodgy deals youve set your life up on when you pass the government gets to redistribute that greed.

                • netjock on 30/09/2020 - 10:53
                  +1

                  @abuch47:

                  anyone passing with 1.2 in pension/holdings

                  You talked about a inheritance tax didn't know you were proposing loop holes.

                  Simple fact is a lot of people who probably made minimum wage in their lifetime would be passing on close to million dollar homes plus if they had some cash savings. For those born in the 50s and 60s they are big savers.

                  Consumption based taxes like luxury car tax, GST (because it excluded fresh food) was targeted at high income earners (because you pay 10% on the $4k hand bag).

                  Double taxation, then no thanks.

                  Use this calculator

                  Saving $10k a year returning 7% for 40 years will place you at $2m. Inheritance tax only punishes the savers not those who live pay check to pay check.

                  • lostn on 30/09/2020 - 14:13

                    @netjock:

                    Saving $10k a year returning 7% for 40 years will place you at $2m. Inheritance tax only punishes the savers not those who live pay check to pay check.

                    The assets test to receive the pension also punishes the savers and rewards those living paycheque to paycheque. I hate any system that rewards those who don't save for the future and punishes those that do.

                    If you're someone who gets an average wage lives frugally, doesn't go on holidays every year or drive expensive cars to live more comfortably in retirement, you might not get the pension because your assets are too high.

                    • netjock on 30/09/2020 - 14:17

                      @lostn:

                      The assets test to receive the pension also punishes the savers and rewards those living paycheque to paycheque. I hate any system that rewards those who don't save for the future and punishes those that do.

                      I agree. Maybe the government should just do a co-contribution. SG is 9.5% if you voluntarily contribute up to 5% the government can match it.

                      Then remove the pension payments. Government still makes 15% on the investment returns.

                      But then asking people to save is just too much because pension is like FREE money (not).

                  • abuch47 on 30/09/2020 - 15:00

                    @netjock:

                    You talked about a inheritance tax didn't know you were proposing loop holes.

                    what? choose less but better words.

                    Inheritance tax only punishes the savers

                    great the world needs it now not down the track.

                    tax everyone greater but specifically go hard on those who skirt paying anything at all.

                    • netjock on 30/09/2020 - 15:11

                      @abuch47: You know savers are the ones who deposit money in the bank so you can take out a home loan at 2.3% because the bank is paying them 0.25%. More savers equals cheaper interest because the money needs a return and lower rates entice people to borrow.

                      If everyone is living pay check to pay check (or cheque depending on how picky you are) then where is the credit going to come from?

                      tax everyone greater but specifically go hard on those who skirt paying anything at all.

                      How do you get saver = skirting paying anything at all.

                      People who evade / avoid tax needs to pay appropriate amounts of tax that is a moral / ethical issue. Taxing everyone more doesn't necessarily solve a moral / ethical issue. You might want to read up on this

                      • whooah1979 on 30/09/2020 - 18:41

                        @netjock: The banks not having access to cheap capital means fewer mortgages. This may help lower the price of properties.

                        • netjock on 30/09/2020 - 19:21

                          @whooah1979: You have no idea how economics work.

                          Australia has run a trade deficit for years before the recent mining boom. Who is financing our spending beyond our means? Foreign countries with surpluses (like China) who lend it back to us.

                          Don't think for a minute there is enough savings in Australia to buy all the property there is in this country. If every man and woman can borrow 80% LTV then where is the money coming from? Offshore.

                          • whooah1979 on 30/09/2020 - 19:53

                            @netjock: This isn't the 90s. Australia isn't the hot ticket that it once was and the PRC is no longer our friendly neighbour in trade.

                            What the property market needs is a correction not unlike what happened on Feb 21 2020.

                          • leiiv on 30/09/2020 - 19:55

                            @netjock:

                            then where is the money coming from? Offshore.

                            No, Most come from the future.

                            • netjock on 30/09/2020 - 20:34

                              @leiiv: That too. Mortgaging our future.

                    • lostn on 30/09/2020 - 16:24
                      +1

                      @abuch47: savers are the ones who bail out the economy in times like this when governments go deep into debt and print more money. Be more grateful to them.

                      The inflation caused by printing money is felt hardest by the savers whose money shrinks in value. Borrowers on the other hand win out.

                      Someone who has no vices, doesn't smoke, drink or do drugs and saves up a lot of money for retirement should not be punished for not "living life to the fullest" like spenders do.

                      • whooah1979 on 30/09/2020 - 18:07

                        @lostn:

                        Someone who has no vices, doesn't smoke, drink or do drugs and saves up a lot of money

                        People like this is bad for any economy. A reduction in spending will lead to a recession which will lead to a depression.

                        • netjock on 30/09/2020 - 19:19
                          +1

                          @whooah1979: People like these are not bad for the economy, it is just bad for the government. Have you seen the taxes on smoking, alcohol and gambling?

                          There will still be other spending to replace. It is like the idea behind fossil fuel and renewables. Demand isn't going away it is just how you choose to spend it.

                        • lostn on 04/10/2020 - 09:13

                          @whooah1979:

                          People like this is bad for any economy. A reduction in spending will lead to a recession which will lead to a depression.

                          And yet someone who earns double what a frugal spender makes but spends it all will cost the government a pension. Not to mention medical costs as a result of smoking and other vices.

                      • abuch47 on 01/10/2020 - 08:24

                        @lostn: lol

  • cloudy on 29/09/2020 - 10:58
    +1

    I would continue renting till the house market bottoms. Small drops percentile wise, in housing price can easily justify a year or twos rent. So no hurry there.

    As to where to invest, depends on your knowledge. No knowledge = go diversified fund or ETF.
    IF you are keen to do it yourself, look for smart tips from people who just wanna share knowledge and not the pump and dump types that say “all in on APT/BRN(insert the next hot stock)” without justification/valuation.

  • pufffdragon on 29/09/2020 - 11:06
    +5

    Is this OzBraggin now?

    • netjock on 29/09/2020 - 11:55
      +1

      It is what happens under lock down and you don't have dinner parties / BBQs to give you the forum.

  • sauce2k6 on 29/09/2020 - 12:53

    member for 2 days. Ok this is believable.

    does not work, has a family, renting.. but has money in offshore accounts and 60k in commsec.

  • reddwarf on 29/09/2020 - 13:55

    split in half,

    invest first half in shares to generate growth and passive income (VTS VEU VAS)
    perhaps wait till after US election to do so

    use second half for house / holiday / jewels / breast pumps

  • ge on 29/09/2020 - 14:43

    Open a SelfWealth account and buy 800k worth of VAS and 800k worth of VTS. Enjoy the dividends and long-term growth. Never sell.

    Keep 200k in cash in order to buy a ~900k house with 20% deposit as soon as you+wife have jobs that give you ~720k of borrowing capacity.

  • screensaver on 29/09/2020 - 15:53

    seems to me you are at risk of losing this money. Even if banks are currently very low interest here at least they are safe. I would then shop around for good deals in property, those that have a bit of room for capital growth. I have seen some already.

  • tobi on 29/09/2020 - 19:50
    -1

    I cannot stress this enough, do not buy a house, buy land and build your own home.
    Look into prefab homes.

  • burns13 on 29/09/2020 - 20:55
    +2

    Laughs at the idea of getting advice from a professional financial advisor.

    Asks Ozbargain anonymous forums instead

  • trapper on 29/09/2020 - 22:09
    +2

    The best way to invest this would be to break it up into 160x $10,000 lots and then distribute each to a random Ozbarginer

  • ameel on 29/09/2020 - 23:44
    +1

    Buy eneloop batteries. https://www.ozbargain.com.au/product/eneloop

  • kent08 on 30/09/2020 - 00:15

    can someone advise how i can also put my savings in a bank account that pays 7%?

    • whooah1979 on 30/09/2020 - 00:31

      It isn't possible for retail customers to earn a 7% APY from an Australian bank.

    • acersaurus on 30/09/2020 - 08:29
      +1

      In fact if you look at interest rates in the developed world, it seems impossible anywhere. They are close to zero or negative in Europe, Japan and the US for instance.

      Even Greek Government bonds, once considered quite risky - and I would think still a bit risky, are paying only about 1%.

      It might be possible in the developing world, but assume it must come with significant risk.

      It's this point that makes me wonder if OP is a troll, that said it is not that rare for someone to inherent money like that. There are a lot of rich elderly people out there.

      • netjock on 30/09/2020 - 11:04
        +2

        He might not be a troll but he has no idea.

        Overseas and high interest rates carries the following risks:

        Currency risk. If interest rates drop, current depreciates big time, taking out some of your capital.
        Country risk. The country can implement policies like bail in (Cyprus) or exchange controls.
        Company risk. The bank you are with all of a sudden isn't so safe anymore (Lehmans, Bear Sterns etc)

        That is just risks that you know. It all works until it doesn't. Black Swan. 2008/9 and COVID19 are good examples. OP should read about Asian financial crisis and why Thailand at the time set off a domino effect.

        • whooah1979 on 30/09/2020 - 11:34

          Black swan comes once or twice in a lifetime. The volatility that they bring can be very profitable and should always be taking advantage of.

          • netjock on 30/09/2020 - 12:09
            +1

            @whooah1979: Comes more often than you think. It is just Australia is shielded by our old school miners, banks which makes the ASX pretty static.

            After 2008/9 there was Eurozone financial crisis (2 waves) and now COVID19.

            Before that between the tech but of 2000 there was Asian currency crisis.

            Meanwhile Australian house prices and economy just kept chugging along.

            • johndough2020 on 30/09/2020 - 18:19

              @netjock: Love Black Swan event. I've earned heaps from this crisis alone.

              But then I also lost my job so… I'll take back what I said about loving it.

  • sauce2k on 30/09/2020 - 10:53

    you are unreal OP comes to ozbargain seeking financial advice

    • leiiv on 30/09/2020 - 19:57

      But from the comments so far, it is not too bad, really.

  • Pacify on 30/09/2020 - 15:54

    Sure man, you really going to ask a random internet forum how to invest 1.6m lmao

  • chansc on 30/09/2020 - 19:19

    This is not a financial advice, but if I am in this situation I will first work out my yearly expenses and use the 4% rule to determine the investment amount. For example, if the income before tax needs to be 50K, then I will invest 1.25M (e.g. in index funds, etc) and use the rest to buy a house.

    You can also set up a family trust so that the income can be distributed to multiple persons to minimise tax but this will require ongoing accountant fees. I suggest you to see an accountant regarding this.

    EDIT: you probably also need to have some emergency cash in the bank as well.

  • [Deactivated] on 30/09/2020 - 19:59

    I don't believe in financial advisor as "if they're so good, where are their yatch?"

    So is that what you're going to spend your money on to "ensure" your family's future? A yacht?

    Why asking Ozbargainer, because we're frugal with our money.

    Free advice vs. professional advice.

    Seeking free medical advice on an internet forum vs. seeing a qualified and registered doctor?

    I wonder which information source I should seek to "ensure" my health and family's health. I'd pick a good practitioner.

    • whooah1979 on 30/09/2020 - 20:42

      Medical advice from qualified health professionals is based on science.

      Financial advice from financial advisors is based on which products that pay them the most commission.

      • [Deactivated] on 30/09/2020 - 21:32

        Not financial advice and not giving any direction to OP on what to do. But if it was me, I'd try to find a good, yet affordable, advisor that instills trust and can be trusted. Engaging in due diligence in researching the advisor/business and their background. Trusting gut instinct when interacting with the advisor/business. Comparing results, before and after engaging their services, and periodically. Tracking my money.

        If the OP can do his research well and devise a way to preserve the $1.6m by going it alone, then great.

  • Cadic on 30/09/2020 - 22:40

    Put them all on Red .

    • johndough2020 on 01/10/2020 - 04:15

      someone said black the other day. Hard to make up my mind.

      • Cadic on 01/10/2020 - 18:44
        +2

        Don't listen to them black only have 50% chance to win .

        • Some Guy on 19/10/2020 - 23:04

          not quite. There's a green square too.

  • Patchy01 on 01/10/2020 - 14:04

    Obviously the op is either, A. full of shit. Or B. has obtained the money illegally and doesn't want to risk getting legal advice. If you are to come across that sort of money, you don't tell anyone unless you trust them 1000%. You also invest a measly few thousand dollars into sound fiscal advice. If the op was asking for advice on a good adviser, I could believe them but it looks very suspicious.

  • lunartemis on 02/10/2020 - 10:11

    Do you actually have the money or did some Nigerian Prince promise you have been randomly selected?

  • ilove on 04/10/2020 - 19:41

    1.6 mil in Sydney = a house. put it in a offset account? look for a good house to invest in or live off the interest.

  • RubenM on 12/10/2020 - 09:58

    I'm not telling you what you should do, as that would be financial advice, which I'm not qualified to give, but I can tell you what I would do.
    I'd buy a commercial investment property with a long strong lease in place. 5% yield should be achievable, which would give you $80k/year (assuming $200k closing costs).

    Even better would be to borrow though. Assume you can get a 50% LVR (which might not be realistic not having a job, but you could also consider buying in a trust) at 4% for 25 year, then your annual repayments will be $102,419.
    So in year 1, you'd actually only pull out $57,581, which is obviously less than $80k that you would have gotten if you hadn't taken a loan. But assuming 2% annual increases, after year 13 you'd actually be slightly ahead in terms of net income and at the end of 25 years, you'd obviously have a fully paid of CIP that's worth twice as much as the one you could have bought without a loan. You'd only be 54 at the time, so still plenty of time to enjoy life and in the meantime, you would have been able to draw a "salary" that's enough to live frugally for a whole family.
    Oh and in year 26, your income would be $262k in the borrowing scenario.

  • b0b0 on 18/10/2020 - 00:41

    Hi OP, I don't have advice to give as I don't have inheritance and haven't been able to save that much. But I can name a number of friends who have the problem you have. It is indeed a good problem to have.

    Good luck :) I'm keen to learn what you actually choose to do in the end.

  • Geekomatic on 02/01/2022 - 00:52

    100% troll. What a sh*tty thing to do. :(

    • Tyrx on 02/01/2022 - 09:40

      Uh - the last reply was in late 2020…

  • Sam Sharik on 17/01/2022 - 21:35

    Move to a third world country with the money and live like a king for generations :P

  • johndowy on 21/01/2022 - 13:19

    Have you ever really gone to a financial advisor and asked them where they yatch is? You'd be surprised.

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