Many options for a windfall

I have recently inherited $50,000 from a favourite aunt who passed away. At age 62 I am still working fulltime. I have paid off the mortgage on my home. I am wondering what I should do with this unexpected windfall. I have thought about putting it towards a rental property, but I have been reading about the risk of P labs and the cost of decontamination and that's giving me cold feet. I have also been thinking about putting the money into my KiwiSaver account for my retirement, but I read Michael Cullen's comments that some of my savings could be taken by the Government and now I'm not so sure. What should I do?

I will start first with the ideas put forward by former Finance Minister Sir Michael Cullen recently.

Sir Michael suggested that KiwiSaver be made compulsory with a clawback tax of 10 per cent on payout, paid into the New Zealand Super Fund.

To put this in context, these comments were made in a speech at a Grey Power meeting in Napier last week, attended by about 200 people.

Sir Michael (he was knighted in 2012) has not been in Government since November 2008 when Labour lost the general election.

When the current or any future Government revisits the problem of funding our retirement needs in years to come they will no doubt consult widely, but they may not seek the opinion of a retired politician no matter how eminent.

The KiwiSaver Scheme is regulated by the KiwiSaver Act 2006.

The Government is able to make changes to the scheme, but they must follow the appropriate process.

They would also be mindful that too many changes would result in a loss of confidence.

Building the financial capability and confidence of New Zealanders is a priority for the Government and KiwiSaver is a key component.

Any changes to KiwiSaver have to be carefully considered.

Currently money going into KiwiSaver has already been taxed, investment income and some capital gains are taxed, but any withdrawals are tax-free.

Once the money has gone into your KiwiSaver account it belongs to you, and if you were to turn 65 tomorrow you could apply to withdraw it all.

Yes, the Government can make changes to the KiwiSaver Act, but it is unlikely to make changes that would upset a large number of the voting public.

Should you invest your inheritance in a rental property? P contamination has been in the news lately, with the problem described as a potential rival to the leaky homes crisis.

Prospective owners can get homes tested before they buy, but future P use by tenants, and of course P manufacture, would result in contamination.

The cost of clean-up apparently starts at $1000 rising to a several hundred thousand if a P lab is involved.

Wall coverings, furnishings and curtains may all need to be replaced.

The risk of P contamination is only one factor when looking to invest in property, but for many people property investing has been an interesting and financially rewarding experience.

Do your sums and talk to your local Property Investors Association, they are ready to help anyone thinking of becoming a landlord.

You could also consider getting personalised advice from an Authorised Financial Adviser to help you make the right decision for you.

All Authorised Financial Advisers must comply with a Code of Professional Conduct.

First and foremost among these, is the obligation to place the interests of the client first and act with integrity.

You have been fortunate to get this unexpected windfall from your aunt.

KiwiSaver or a rental property are not your only choices. Take your time and look at other options as well.

- Shelley Hanna is an authorised financial adviser (FSP12241). Her disclosure statement is available on request, free, by calling (06) 870 3838, or see peak.net.nz. The information contained in this article is of a general nature and is not personalised. Send your KiwiSaver questions to shelley.hanna@peak.net.nz.