I’ve inherited $400,000 in shares. What should I do with them?

You have reached your maximum number of saved items.

Remove items from your saved list to add more.

I’ve recently inherited $400,000 in shares and I am unsure what to do with them. My financial planning approach to date has been pretty simple: pay off the mortgage, then put whatever I can into super.

The mortgage was cleared two years ago, so all I’ve thought about is super. My initial inclination therefore is to sell the shares and put the money into super, but I’m conscious that this will trigger capital gains tax, which is not insignificant. Appreciate your thoughts.

One would be to retain the shares and use the dividends to make extra super contributions.Monique WestermannYour plan of attack thus far sounds very sensible. I’d be interested to know your superannuation balance. If it is under $500,000, perhaps you have some unused concessional contribution caps from the previous five years. If this were the case, you may be able to make a tax-deductible catch-up super contribution and use that tax deduction to offset the capital gains from the share sales. The share sale proceeds would fund the contribution.

If this approach is not available to you, then you really would need to crunch the numbers as to the extent of the capital gains tax payable when you sell the shares. Potentially, you could progressively sell the shares over several years to help manage the expense. Often in a portfolio there’s one or two losers, so you might be able to orchestrate the sale of these holdings with some of the winners, so the capital gain position nets out.

An alternative approach would be to retain the shares and use the dividends to make extra super contributions. In this way, no capital gains are triggered.

Your situation is definitely one that would benefit from sitting down with a Financial Planner and crunching the numbers.

I’d like to be able to retire in my mid-50s. I’m 47 now. I can’t access my super until 60, so I’m conscious I need something else. I do have an investment property, and that will produce some rental income, but that alone won’t be enough for me to live off, and I don’t want the headache of any more property. What should I be focusing on between now and when I hang up the boots?

First port of call is clarity on how much income you need to live comfortably once retired. Armed with this, we’d want to understand whether, on the current trajectory, your super will cover your needs post age 60.

Let’s assume this is validated (since if it were not, you probably wouldn’t retire in your mid-50s). Now we need to solve for the years between your retirement and age 60. If you retired at 55 and required $75,000 per year to live comfortably, for instance, then you would need $375,000.

This is very simplistic, since we need to account for inflation, and the fact that your rental property will provide for some of your income. But it’s a good start. It presents you with a goal to work towards.

As to where you would accumulate this pool, ideally you would use an investment platform that facilitates monthly additions at no cost, into a growth-oriented portfolio. These platforms also offer regular monthly withdrawals, so once retired you can reverse the cash flow, so that your investment pool provides you with regular income.

An alternative could be to sell your investment property and live off the proceeds until super becomes available.

The precise solution depends on your income tax position, tolerance to risk, housing plans, and broader family context. But hopefully this gets you started.

Paul Benson is a certified financial planner at Guidance Financial Services. He hosts the Financial Autonomy podcast. Questions to: paul@financialautonomy.com.au.

Expert tips on how to save, invest and make the most of your money delivered to your inbox every Sunday. Sign up for our Real Money newsletter.

You have reached your maximum number of saved items.

Remove items from your saved list to add more.