Question 1. At 62 years of age, both myself and my husband live in our own home (worth $ 900,000) with investment house worth about $ 550,000, but we have a combined home loan mortgages totaling $ 640,000.
As we would like to retire in a few years, and we do not know where we will be living, we would need to live in the investment house (Qld) in order to sell it, so once we sell the house we are currently living in (NSW), are we likely to get much of a pension?
We currently have a combined superannuation of $ 170,000. We earn about $ 50,000 each working about four days per week. We keep tossing up whether to sell both houses and buy something else or stagger selling the houses, but would like to not miss out on any entitlements as both of us have worked long and hard for 45 years up to now.
You have five years until you attain pension age and it’s good you are planning for your retirement now.
Firstly, if you do have an investment property and a loan at age pension age, then you need to ensure it’s structured appropriately to maximize age pension payments. I covered this recently.
Currently, for a couple that own their own home you can have up to $ 419,000 in assets to get the full age pension and up to $ 915,500 (as at July 2022) in assets and still receive a part age pension.
Your principal home, ie the one that you live in the most of the time, does not count under the asset test.
The above assumes you would fall under the asset test, however, if you both continue to work past age pension age and continued earning $ 50,000 each, even allowing for the work bonus, you would be right on the cut-off point of receiving a part age pension under the income test.
How much pension you receive at age pension age will be dependent on your level of assets at that time (not including your home) and whether you are still working.
As a guide, and making a few assumptions, such as you sell your NSW home and clear all debt and have, say, $ 300,000 left over plus $ 200,000 in super at that time, and you are both not working. You would both receive about 80 per cent of the full age pension.
Obviously maximizing the age pension is only one factor to consider. You need to also take into account maximizing the sale price of your properties, any tax implications and how long you wish to work for.
Whether to continue to work and having a home in a location that suits you are also about lifestyle considerations, which are just as important as financial ones.
Question 2. I am 63 and currently on the dole and my wife is on a disability pension. I may soon inherit around $ 50,000 and am thinking that, as I will lose the dole anyway, I will use that for my income until I reach pension age, then apply for the age pension.
Will this affect my wife’s DSP and is there anything else I should be taking into account?
As you are under age pension age, if you place most or all of the inheritance in your super account it then would be shielded from the income and asset test, both for yourself under Jobseeker (AKA ‘the dole’) and for your wife’s Disability Support Pension (DSP).
The amount of $ 50,000 on its own wouldn’t affect your wife’s DSP – it would depend on your combined overall level of income and assets.
With both of you being on income support payments I could imagine money may be tight and you may not have had funds to make repairs or upgrades to your home, car or appliances etc. Using funds to immediately pay for these items will mean they also are not counted for income or asset tests.
Question 3. How much money do I need to have available to last until payments start when I retire – I intend to transfer my money into a QSuper income account.
As soon as you have met a ‘condition of release’* you can transfer your super to an income stream account.
This normally only takes a few weeks, however you first need to ensure all your contributions have been made into your super account, ie your employer has made all their required SG payments.
* When retiring, a condition of release is met in any of the below circumstances:
- Attaining age 65 (whether will working or not)
- Attaining age 60 and terminating an employment agreement (ie stop work or change jobs)
- Attaining your preservation age and retiring (for anyone born after July 1, 1964 their preservation age is 60).
So you should only need a few weeks of income put aside before you can commence a pension with your super so long as you have met one of the above conditions of release.
Craig Sankey is a licensed financial adviser and head of Technical Services & Advice Enablement at Industry Fund Services
Disclaimer: The responses provided are general in nature, and while they are prompted by the questions asked, they have been prepared without taking into consideration all your objectives, financial situation or needs.
Before relying on any of the information, please ensure that you consider the appropriateness of the information for your objectives, financial situation or needs. To the extent that it is permitted by law, no responsibility for errors or omissions is accepted by IFS and its representatives.
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