Should I spend my money to have full Age Pension?
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- เผยแพร่เมื่อ 26 ก.ย. 2023
- Should I spend my money to have full Age Pension?
Advice provided was to spend $300,000 within the period of 3 years, enjoying travelling around the word, and on return to Australia at the age of 67, to only have $451,000 (value in today’s dollars) left in pension accounts to be eligible for the full Age Pension payment.
So for the first 3 years to spend approx.. $100,000pa and once back in Australia and receiving full Age Pension to reduce income to $70,000pa in today’s value.
SCENARIO 1 - spending money to gain full Age Pension
Before I start showing you my comparison, please let me know in the comments below the video, what is your opinion about this advice? Would you accept it? Would you agree that this is a good retirement plan?
SCENARIO 2 - mixture of retirement income streams
Commencement of mixture of account-based pension and annuity
SCENARIO 3 - reduction of spendings
Let’s do a copy of the Scenario 2, but with a reduction of spendings from $70,000pa down to $65,000. Would that make any difference in the outcome?
SCENARIO 4 - improved and maximised investments
For now, I have assumed a very conservative rate of return of average of 6%pa. Let’s take it a notch higher to 7%, which really should be the aim of most balanced funds.
So which scenario would you choose?
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Thank you for your video. Who knows what will happen in the following years at retirement. Having worked in Aged care I have seen what aging does - as a rule you will be a shadow of your former self even if you are healthy in your late 70's and early 80's. Live it up for the next 10 to 15 years you have left after your mid-60s - You just don't know what you will be confronted with ... Cheers
Excellent video. Thanks for going through the scenarios.
Interesting scenarios to think about.
Thanks for the video. The information is very useful
This is excellent advice Katherine and I think I would take Scenario 4 over the other 3. I am already 70 and am healthy, and very active, still renovating houses and living life to the full, despite getting through cancer and having what some would call chronic illnesses. I just lead my life as normal and don’t take much notice of them. I plan on living life to the full for the next 20 years at least and despite having hardly any Super, nowhere near your scenarios, I am still hopeful that I can enjoy my Golden years. Therefore, I need and a safe and secure income stream until I cross over into the next great adventure. Thanks for your wonderful,videos, they give me hope!!! 😊
I absolutely enjoyed this video. I am 68 and still working full time. I plan to retire in 2-3 years. I agree with scenario 4. I want something left for my family.
Everyone is different. I am lucky having worked for the same company for 35 years and get a good income. Thank you for your great videos and advice.
So glad to hear that the video has been helpful 😃
So clear with your talking and common sense , I agree don’t get to greedy with the pension , it’s there as a safety net , my wife and I are drawing 4% , of super Mine changes to 5% in June , we’re travelling good even though last couple of years you definitely need more money for the same standard of living , I think slow and steady wins the race , but Enjoy the rest of your life
Sorry but first couple are correct, life is about living and using your own savings to go and enjoy for 3 years wow isn’t that why we work for 50 years, worrying about money yuk, getting a small job on return to boost income would also be smart but who knows what the future holds, do not hold back and do not listen to people that think money is life. Enjoy,relax, and live a life worth living. 🎉
jobs are losing value daily with massive layoffs, Last year I was working full time budgeting groceries, unable to afford date nights, and missing time with my kids just to make extra money. These days I learn how to make money online, Using my job to finance my goals, You can't be an employee forever everyone should know by now, making extra cashflow interest everyday or weekly should be the goal now.
Having a job doesn't mean security rather join a business trade.
Our financial way of life absolutely needs to be blown up, but at the same time, people also need to be more responsible. I know for a fact that there's a lot of people that simply don't make enough money. I make roughly 100K a year and in California, rent prices alone eat up almost 3/4 of what I make.
Throw in dependents, and other financial obligations and it's easy to end up in the negative.
Big ups to everyone working effortlessly trying to earn a living while building wealth even after the massive layoffs. My wife and I we are both retired with over $2 million in net worth and all paid off debts. living smart and frugal with our money, made it possible for us this early, even till now we earn passively with our asset coach.
Adapt to a lifestyle, be thrifty, set a budget, save money and build more streams.
Impressive John! having a great savings and more streams to earn makes life goal’s easier, I make most stock purchases when the market is in a confirmed uptrend or cheap cost, although most stocks I bought months ago which showed strong signs of doing well has greatly underperformed. It’s okay for me on the long run, however it’s a good time to add to existing holdings at follow -on opportunities.
you could also take advantage of some growth stocks at the moment, every pro is currently bagging some dips. For me, my coach margaret ann myatt the intelligent guide has been using every opportunity to ensure I benefit, well positioned as I’m also privy to improve.
Excellent video, well thought out. I would of included one additional scenario. Only spend one year travelling and spending $100,000, as most likely they do also want to go on a BIG holiday.
Having spent my whole working life on a low income (except for the half year I worked 2 jobs and had a total income of $50,000), I am easily able to live on the age pension alone. I obviously don't have an expensive lifestyle, but I do have at least one holiday a year, usually overseas. My savings are being spent currently on home improvements, to future-proof the cost of maintenance. I don't even need to begin an account based pension at this time, perhaps in the future.
Congratulations Robyn, you mist be paying attention to your cashflow and not overspend on silly stuff. 👏
I think the planning needs to be more fluid. The first years of retirement, you are more active and it's possible to spend a lot more money to get out there and enjoy what the world has to offer. New hobbies may be found, new side-hustles might start up...but once you hit 75, it's probably not likely you'd be needing those ski holidays to Switzerland any more and a bowls club membership might be more your speed. A lot of "oldies" I know have difficulty spending the money they have. even though my wife has retired and I'm a long way off doing the same...her income stream is keeping her happy with her hobbies, but she's still spending less than she earns and her pension account is still growing rather than shrinking. Added to that we have a home that will be waaaay to big for us in a very nice suburb and a downsizing should net us a comfortable $1m+ in today's cash, but timing that event should be interesting in trying to figure out if and when we may need some major medical treatments and ensuring we have that health benefits card in play when we need that.
Good planning Roger, thank you 🙂
If you downsize, you would lose your age pension if you have one.
This example will be very close to where we will be, hopefully, when we reach pension age in a few years.
Currently we draw about 50k per year from savings to live on and will likely be about 150k above the limit for maximum pension at 67, assuming Super does not increase/decrease over the next few years.
We don't want/need a lavish lifestyle so if we were to receive 70k per year it would be more than enough for us to be comfortable on.
Also throw in things like reducing expensive things like life insurance and the reduction in costs that a pension healthcare card brings and it gets even easier.
The reality is for most that as you get older you tend to spend less anyway imo.
My mother lived comfortably on a single age pension for many years but you obviously have to be well set up in terms of owning your own home and not having to spend on big ticket items along the way.
Very handy video, thank you.
Thank you 😀
I like Katherine's hair like this ! :)
Thanks Catherine. I think for us, the additional mental reassurance of a (partial) annuity will be a worthwhile investment. It isn't the HIGHEST return possible, but it is the most secure. We want to live well, have a portion of our Super in an annuity type product and never have to live on ONLY the age pension....no matter how long we live.
Yes, annuities have lots of benefits.
One thing for me regarding option 4 is I "day" trade smaller amounts, 2-5k using options and "park" larger amounts 150K in shares. When I retire, I will look at this "parked" money to work harder.
HI, great video. Thank you. I am just wondering, how much should one budget for private aged care, so that they dont end up in a nasty care home?
What was the amount invested in the lifetime annuity in scenario 2? This is important due to the way annuity counted in aged pension entitlement.
Interesting scenario’s. Personally, I dont think it is very responsible to have a big splurge just prior to retirement as anyone persons scenario & life can change at any moment.
While it might be nice to try to plan to have a health care card & a few dollars a week from the Govt in a few years time for some, I think it is better to plan not to need it in the first place, & should be a priority above overseas travel &/or splurging, if you can do that & still have plenty of splurging money as well, then half your luck & go for it, we’re not getting any younger or healthier.
The way things are going now days, budgeting &/or investment planning are essential survival tools, & $500K doesn’t seem like a lot of dough to plan a decent retirement on anymore.
Personally I believe it’s best to hold onto your assets and try to grow them and not get caught up in trying to simply increase your pension entitlement. As long as you are doing well, have enough to provide a good retirement, don’t waist assets.
The value of your house rises, in later years you could downsize to a smaller unit, to realize extra cash
The big problem with living on the full age pension as a couple is that when one partner dies the surviving partner is then reverted to the single aged pension which is a substantial reduction in income from joint pension to single pension but he or she will still ultimately have near the same expenses.
The examples were interesting however, there was no mention of keeping spending power abilility at the same level over those 15 years. Inflation now is at an all time high and fixed incomes mean less spending ability day to day. We are having a hard time deciding which direction to go in. We have assets that keep pace with inflation which are going to provide a good base but I can’t see how your scenarios account for rampant inflation challenges.
Have a good time while you're still young and healthy because if you make it to your 80's most people aren't going to be that active. But at that age you want to have a comfortable age friendly home or aged care facility and good health care. scenario 4 is definitely the most attractive.
From my calculations I reckon the couple should stick with their original plan.
If they spend$300000 in the first 3 years they will have a hell of a good time holidaying for that time.
The 450000 they have left will accrue around 7% earning $31500 (indexed at 2%)
interest a year, add this to their couples pension of $44188 a combined total of $79188
This equates to $79188 a year or $1522 a week, more than enough to live a good quality life.
With this scenario their super will run out at age 88
Where can you safely find 7% return? In your scenario, the couple's asset should never diminish, as they will only spend the investment return and don't need to eat in the capitals.
Could also boost by selling and downsizing the house long before super runs out.
You were a bit off with your calculations, I didn't see or hear anything about the deemed amount on super and savings, or any added assets like cars , boats etc, by my calculations they would not get a full pension.
Thank you for another informative video. One thing I was wondering if you could answer. From the time I retired till the time I actually received my age pension we have spent $21,000 so I updated my income and assets with centrelink. This was 3 months ago and I have heard nothing from them, the application has been accepted but hasn't been finalised. Is it usual for centrelink to take this long. Thank you Catherine.
Unfortunately yes, often it is a waiting time of number of months. But if you've been waiting over 3 months already, just give the office a call and request for update and assistance.
Great video!
We are not big spenders, but is $70k a year enough? When you are getting older, I imagine you would need more money as a lot of things you can DIY you can't do any more. You have to hire and pay. You also need more money as your medical needs go up. You also want to have money for family occasions and a bit of gifting to your grandchildren.
If I want to plan for a $85k per year retirement income, can I get any age pension components in it? Or I have to give up age pension completely?
At the end of the day, most likely Age Pension would be reduced under the Assets Test, regardless of the level of income you draw from your pension fund, unless you have some kind of a defined benefit pension. There is no limit of how much you can draw as income from you pension fund, so you can have your $85K, the question however remains how long would such a level of income last with the savings balance you have. So in all, it is possible, but would need to be properly calculated based on your personal assets values.
Hi thanks for the video. Your video is very informative. I am turn into 60 this years, my partner is one year older than me . We are plan to retire at 60 by selling our 2 investment properties pay off our existing debt with some money left over plus super saving we should have total balance of roughly $750k and own our home. Can we still achieve the same retirement living by use your senior 4 ? We plan to living on $1000 /pw ($52000) from now we are 60 till we are 67. Thanks in advance🙏🙏🙏
Hi Danny, there are couple of issues that you would need to take into consideration: 1. if selling properties, how and when to sell and how to deal with CGT, any changes of minimising or removing altogether? Where to contribute surplus funds, if super - whose account, how much each and how to keep it invested so it also can assist when you 67 and hopefully eligible for some Age Pension. If you are unsure how to do all this, please book a meeting so I can discuss it and see the options.
They will have more in scenario 2 than what's stated as once you get real old you have bugger all needs and your health stops you spending
I find your recommendation to purchase annuities to be a bit too enthusiastic.
Some retirees do consider their estates and heirs. If you don't live you lose. The financial advisor is the winner. (some disclosure by you should be forthcoming perhaps?)
$70/annum just to live well as a home owner is way too much, and that skews your projections.
Travelling for 3 years on $300k is also imprudent and you shouldn't be pushing this as an option.
It may be a better option to find and live in a location overseas where one's savings will last longer together with an improved standard of living for way, way less than 70k/year and barely a chip out of the 300k over 3 years that would overwise be squandered on organised tourism. You will still have most of that $300k after 3 years and alot of the 70k allocated to consumption every year. You can change location whenever you want to when renting abroad.
If you have too many assets to receive a full pension you are probably going to be just fine. Planning to be "poor" is poor advice.
I'm confused. If an asset earns income. Does this not cause a reduction in the age pension. How can you have a full pension if you have an income from investments of 40K. Would this not reduce the pension as you are over the income allowance?
The only circumstance where Scenario 1 is even close to being possibly acceptable, in my opinion, is where there is a high probability that someone won't live to old age!
I'm in that situation myself, but NOT intending to splurge. For the sake of my wife, I think that's irresponsible!
The other thing I don't like about Scenario 1 is that is makes the assumption that if I spend my savings, the government aka the taxpayer will look after me. This is fool-hardy. With an aging population, there will be increased pressure on the government's capacity to fund the aged pension, without raising or introducing new taxes.
One issue that is never properly considered is long-term housing. Will there be a need for modications to the home for ramps, wider assess to bathrooms etc or will there be a need to move into a lower maintenance home or aged care?
Is income stream from Super based pension going to affect the eligibility for full pension?
it is fully counted under income and assets test
Hey there Catherine, i thought you explanation was great however you lost me with the annuities as i didnt see how much was invested in this and you didn't say how much was the return per year, was the annuity in additional to the $70k or $65k ? Can you please let me know? Cheers PhilL
I realized that the secret to making a million is making better investment. I bought my 1st home at 21 for 87k sold for 197k, 2nd home 170k and sold for 320k, 3rd 300k and sold for 589k and buyers paid all closing costs expenses etc Not making up to a million before retirement is unfulfilled retirement.!!
You have done great for yourself. I’m trying to get onto the housing ladder at 40. I wish at 55 I will be testifying to similar success!
I started out with a Financial Advisor called *”Janet Santa Sherry”*. Her honest approach gives me complete ownership and control of my positions, and her rates are incredibly affordable given my ROI. However, do your due diligence before contacting a financial advisor..
Great video. I’m 15 years before retirement learning and seeing how much money I need to save in my superannuation.
I think a mixture of scenario 1 and 3 may be good in the couple’s example.
Go to their dream destinations without blowing $250k in 2 years and spending a little less after 67?
Traveling early in retirement is best. I see my parents now struggling in their 80s and they cannot travel.
So possibly this couple should spend some now but spend less as they age. Many older people tell me their spending decreases as they get older and very few of us go past 90.
All in all, a very useful video as I’m trying to accumulate as much as possible in my later working years.
Excellent video again. I think what needs to be explained is why people are wrong to think that, lets say for a couple, you either want to have super/assets of less than $450K or more than $990K, because if you end up in the middle the govt will just make you spend that money by giving you less pension.
Exctly, and that is one of the reasons we have the super scheme - to ease the burden on the taxpayer.
thank you 😀
Hi Catherine. I have a question.
I was born in Australia in 1969 and lived in Australia until 1975. I am an Australian citizen but have no proof of residence for that 6 years. I also have 20 years of payment into the UK government pension. I intend to return and retire in Australia at age 60. Would I have any entitlement to aged pension?
Thanks.
Definitely look into it, for non Australian you need 10 years living in Australia. Not sure if it is the same for Australians.
Hi, ex UK resident here,now a Australian citizen, does the UK state pension affect the amount of Australian pension you get?
Yes any income, it all depends on the amount.
Can you tell me if there has been a pension increase just recently?
yes on 20th September 2023, the single person increase is $32.70pf and for a couple $24,70pf per person.
Additionally...with that new announcement in Victoria just as Dan exited the building, granny flats don't need permits any more...so it may be a case of buying a nice house for my daughter and getting a nice little pad built out the back and get all the assets under her name before deeming comes into play for me and before the govt decides that death duties are a good idea.
What if your daughter's relationship turns sore? You will lose half your assets to her spouse...
@@shuyingli8318
Reminds me of a woman that put her home in her daughters name with the assumption that her daughter would look after her in old age, only for her daughter to evict her to a nursing home.
@@petesmittYes sadly I know a similar story - a woman put her home in her daughter's name and then the daughter evicted her!!! Needless to say, their relationship was destroyed and they are no longer even on speaking terms...
Not really, they have a house full of pension is enough. Also who guaranteed that they live until 75/80yoa
These scenarios are good but nobody knows when we will die!
My mum and dad died aged 79&81 therefore would have money leftover with scenario 1.
Hello Katherine. We would like to talk with you about our future. How do we contact you?
You could always spend your money after you reach 67 without being in a hurry. Haste makes waste.
true, this can always be changed and updated
So can you just withdraw cash and stash it ? How would Centrelink know what it was used for?
There is a problem in keeping the cash you stash secure.
@@sentfromgeemail302 I’ll look after it for you 😜
What are the details for the annuity? No details of how much is put aside and how much is paid each year.
this is done deliberately, because all my videos legally are required to be seen as a general advice and not a personal advice that one can just take and copy. And since this is based on a real case sceanrio, I cannot legally go into details of how much gets invested where.
So centrelink doesnt mind we get rid of excess income in the last years leading up to 67?
I think that if you spend a crap load of cash within a certain time frame before 67 - they will include it as part of your assets???
@@ShaneChiswick i don't know
It's a no brainer . Scenario one is the best, just for the simple fact that you're a longe time dead!
Problem is that $100000 each year won’t allow you to be on permanent holidays, unless you are living a very meagre and unfulfilling existence.
What happens when as a couple you own your own home, have say $500k in pension base account and adraw down of say $26k and you get as a couple $1400 pension fortnight; then your partner dies at age 70yrs? What happens to the living partner who now owns home and pension reduces to $500 per fortnight? Because us Baby Boomers tend to be hit by this situation?
wow Pauline, that is a long explanation, maybe I should create another video for that part of your question
Should I have l put my money in a trust funds hunder family just like the wealthy people do and receive a full pension. I invested and lost 1 quarter of my pension. This is the double standard of the Australian government on how they treat the average Australian pensioners.
Their advice might be legal, but it ignores the whole rationale behind the Aussie Super scheme. It had 2 goals - firstly to ease wage demands on employers by making them responsible for the payments rather than wage rises. It was a good idea and it worked for a while after the unions lost cred and started rattling their sabres again. The second goal was to ensure people had sufficient funds to retire on and so ease the burden on the Commonwealth. Everyone from A to Z has since tried to get around this goal so that the pensioner got the full pension. Personally I find this obnoxious. Taking money out sooner or taking it out to purchase a caravan and a Toyota Land Cruiser so they could get the pension is to me immoral. They could go into an account based pension and still have their world cruise or become grey nomads.
Super scheme is set up in a very smart way whereby in another 10-15 years most people will be automatically cancelled out from the Age Pension eligibility, and I think most people would not mind at all to live of their own assets, as long as the Concession Card was provided to them. This is very often a goal, more then the money itself. thank you
@@AboutRetirementTV Your point about people not necessarily wanting the age pension however wanting the associated benefits is spot on Katherine. Have you covered the Commonwealth Seniors Health Card in any of your videos?
@@PhilInAustralia yes I have, as part of this video: th-cam.com/video/R51iv6oZpAE/w-d-xo.html However, keep in mind that the video is already 2 years old, therefore the income limits have changed dramatically since then. Maybe it is time for an update
@@AboutRetirementTVcould you explain further how people will be cancelled out of the pension by design in 10-15 years?😊 Thanks
Hi Katherine. Can you elaborate on this point? Exactly how is the super scheme set up to automatically cancel people from Age Pension eligibility?@@AboutRetirementTV
no
$451 in super but what about all your assets, this also contributes to loosing your full pension Cars,Caravan,Motor Bike exc ??
no--- do not spend $5 to get $1 back from the gov. its poor decision making.
One might die at 69 then what
absolutely, this should also be part of a good planning, but it could be a different solution for different people
@grahammills1525
1 second ago
$451 in super but what about all your assets, this also contributes to loosing your full pension Cars,Caravan,Motor Bike exc ??
Spend your money, the facts are that majority of people Dont have good health and the bs about retirement returns, the majority of people don't have a good return the only winners are the retirement advisers.
The point of super is to reduce reliance on age pension but of course, people will plan to spend or hide excess money so as to get the full age pension; the government should legislate to keep super as pension plans only, not being spent on holidays, cars, houses, family, etc.
No no no I heard 68 year old couple gave there 3 kids all there money inheritance early 💰 so they can live of the pension now they regret this move and to late kids or ready spent money 😮🤔😳👀🫣