How do I invest on a pension?

pension-potWhen we’re young and carefree, most of us aren’t paying much attention to our finances. Why would we? There are years, even decades, ahead to worry about that.

That said, no one ever sets out in life intending to retire broke.

Sadly, however, this is exactly where many people end up. Currently in Australia the average annual pension is around $440 per week if you’re single, or $660 for a retired couple.

It may be just enough to pay your energy bill, put petrol in your car and get food on the table, but it doesn’t leave a lot left over at the end of the month.

This is one of the reasons why people invest in property – to supplement their income in retirement.

But sometimes, life gets in the way and steers us off track. We start families and have children; we switch careers; our relationships change over time. Sometimes in amongst all of this chaos, it can be hard to stay the course and move forward towards your property investing goals.

This week I’m tackling a burning question from someone in this very situation. She was previously very keen to become a property investor, but life’s circumstances piled on and now, she’s living on a pension.

Altruistically, her burning question is: “How do I help my son get into the property market?”

I’ve got some advice that may just help everyone involved get ahead…

I think it’s a wonderful suggestion when parents want to help their kids get a foot on the property ladder.

But I also believe in teaching our kids about respect and responsibility when it comes to money, so I’m not a fan of giving them a handout.

In this situation, I haven’t been given a whole lot of detail but I’m assuming that the person who wrote in actually owns their own home. Even if they don’t own it outright and instead have a mortgage on their home, it’s likely that they have at least some equity in the property and that it is accessible.

So my advice in this situation would be to consider a joint venture.

By combining their resources, the parent can offer a deposit to use on a property investment, while the son can hopefully provide the bank with evidence of a regular income, which will help them get a loan.

As joint venture partners, they could research a property that is poised to offer strong growth in the next few years.

They can then set an investment timeline of say 5 years, at which point they reevaluate their investment and make decisions to move forward. One partner could buy the other partner out, or they could sell, take their individual profits and move on.

This way, both parties can get the benefits of investing in property. As a parent, you can feel good about the fact that you’re helping your children to get ahead, while they’re also learning valuable lessons around money management without getting a handout.

I must add however that for people who are at or nearing retirement age, it’s essential that you meet with a financial planner to discuss your situation. They can guide you on the best way to plan for your retirement and ensure that you don’t stretch yourself financially and end up struggling to pay your bills, because you’ve invested – in property or shares or another vehicle – without the right advice.

I loved receiving this burning question as it tackles one of my favourite philosophies – thinking outside the box! It’s my view that when an obstacle arrives, if you can’t go over it, then you have to work out how to get around it, go under it or even get through it. There’s more than one way to get ahead in this life!

If you have a burning question I’d love to hear from you! To add your query to the pile, please click here. And look out for my 2 Cents reply in an upcoming episode of my 2 Cents Tuesday podcast!

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