Ask a Finder expert: Should I invest $60K in a house, my super, shares or crypto?
Hi Finder, I have $60K saved. Should I buy a house, put it in superannuation or invest in either shares, crypto or a business looking for backers? I have just turned 50!!!
Got a question you wanted answered? Submit it here.
Hello and thanks for sending in your question. There are pros and cons for each option you've suggested, which we'll go through today.
Buying a house
Yes, owning your own home is a major contributor towards being financially secure in retirement. There are plenty of mental and physical benefits too.
Given current property prices $60,000 might not go so far in terms of a deposit. This will of course depend on where you're looking to buy, though.
The median house price in Australia is now over $1 million, meaning you'd need $200,000 for a 20% deposit. Even a $500,000 property would require $100,000 for a 20% deposit. Depending on your borrowing capacity you could put forward a smaller deposit, but this would mean you'd need to pay lenders mortgage insurance (LMI).
You also need to factor in your mortgage repayments and how you're going to continue to pay these. With interest rates rising quickly at the moment, you need to allow for increases in your repayments too.
I note you've just turned 50. Assuming you'd take out a standard 30-year mortgage, you'd be paying it off until you're 80 unless you put a plan in place to make extra repayments. So, if you're set on buying a property, you'd need to consider how you'll continue to meet your repayments over this time, and well after you've stopped working.
Put it in superannuation
You can add up to $27,500 per year into your super as a concessional contribution. These contributions are taxed within your super fund at 15%, which is likely to be lower than your income tax rate.
Once you add it to your super fund, you can claim a tax deduction for the difference in tax. Not only are you topping up your super and helping it grow, but you're also reducing your taxable income at the same time.
With $60,000 saved you could make contributions over several years (don't forget the annual cap also includes the super guarantee your employer pays you). Or, you could take advantage of the "carry forward" rule which allows you to use any unused contributions from the previous 5 years in 1 big contribution now.
Being 50, you've still got a good 15 years for your super to stay invested before you start to access it. This is plenty of time for that money to grow and benefit from compound growth.
Investing via your super is an easy and cost-effective way to invest. Your fund will invest the money on your behalf, usually in a diversified mix of different asset classes, which could be ideal if you don't know much about investing.
However, once the money is added to your super you can't access it until you retire. So don't contribute the money if you think you might need it in the near future for other things.
Invest in shares, crypto or a business looking for backers
Investing in shares can also be an easy, low-cost way to invest – particularly if you invest in exchange-traded funds (ETFs). ETFs track entire markets, giving you access to hundreds of stocks with a single trade.
As well as being very low cost, ETFs also offer instant diversification (investing in hundreds of stocks means your eggs aren't all in the same basket).
Many super funds invest in ETFs too. While it might be easier (and potentially cheaper) to gain access to ETFs by adding the money into your super, the advantage of investing outside of super is you can sell and get the money back in your account instantly.
Just remember when investing outside of your super you're making all the investment decisions yourself.
While we can't offer you personal advice, I will say this: investing in crypto or a private business is an incredibly high-risk way to invest. High-risk investing isn't necessarily a bad thing, but it can be a very expensive lesson if you're not sure what you're doing.
If you're in your 20s or 30s, you can afford to take on more risk as you have more time to recover if things go pear-shaped. However being in your 50s, you have a bit less time on your side. Losing $60,000 to a poor investment is bad at any age, but it's much worse when you're 50 or 60 than it is when you're 20 or 30.
Hopefully we've helped you better understand your options. If you're still unsure and looking for some personal advice, we recommend speaking to a financial adviser who can look at your financial situation in detail and make recommendations tailored to you.
Have a personal finance question you'd like answered? Submit your question here and one of our Finder experts will answer it in an upcoming column.
