Strategies On Planning for Retirement and Aged Care —Either for a Loved One or Yourself

Retirement and aged care are two significant life phases that require careful financial planning to enable you to enjoy the lifestyle that suits your needs and goals. Superannuation is designed to be the primary financial vehicle for Australians in retirement. The Age Pension is also available if you are eligible. Here are some pre-retirement strategies plus ways to maximise your Age Pension entitlements.

Pre-retirement strategies

It is important to financially plan for your retirement as early as possible. According to the latest ASFA (Association of Superannuation Funds) Retirement Standard, the average Australian will need the following lump sums to retire at age 67, assuming they own their own homes.

Type of retirement lifestyleCombined savings required at 67 (couples)Savings required at 67 (singles)
Source: ASFA

It is worthwhile obtaining independent financial advice to help you achieve sufficient retirement savings by age 67 (or earlier). Pre-retirement strategies that you could implement to enhance your financial position by the time you want to retire include:

  • Paying off your home or any other debts as soon as possible and investing surplus funds in growth assets. However, one mistake to avoid is having a well-meaning relative pay off your mortgage for you because although this will eliminate your debt, it will boost the value of your assets and result in you getting a reduced Age Pension (or perhaps none).
  • Boosting your super by taking maximum advantage of your annual concessional contribution cap (including using any used cap amounts from previous financial years). However, it is important to understand that your superannuation balance is included in the Age Pension assets test, so it can reduce your Age Pension entitlements.
  • Structuring your assets and income to enable you to qualify for either a part or full Age Pension.

What to do with assets to maximise your Age Pension entitlements

Age Pension eligibility is subject to both asset and income tests that are reviewed in September each year.  It is important to structure your assets and income effectively to maximise your Age Pension entitlements. Ways that you can do both before and during retirement to reduce the value of your assets include:

  • Before you turn 62, gifting up to $10,000 per year (up to $30,000 over a rolling five-year period) to family or friends to reduce the value of your assets.
  • Renovating your home at any time (as your residential home is exempt from the Age Pension assets test).
  • Contributing to your partner’s super if he or she is younger than 67 (the Age Pension eligibility age).
  • Investing up to $15,000 in a funeral bond as they are also exempt from the Age Pension assets test), or alternatively, prepaying your funeral expenses up to any amount.
  • Buying a lifetime annuity income stream (as only 60% of the purchase price is included in the Age Pension assets test).

What does Centrelink look out for?

If you pass the Age Pension income and assets tests to qualify for either a full or part Age Pension, you must notify Centrelink of any changes to your income or assets within 14 days to ensure that you receive the correct Age Pension amount.

Aged care transition

Eventually, you or your loved one may need to transition from living in your own home in retirement to aged care.

What to do with the family home—keep it or sell it?

If you or your loved ones move into aged care, a decision will need to be made on what to do with the residential home. You may need to sell it to finance the move, but if not and you decide to keep it as an investment property, then it will be assessed under the Age Pension asset and income tests and may affect you or your loved one’s entitlements.

Which aged care facility to select

The two main options available in aged care facilities are:

  • residential aged care if you or your loved one can no longer live independently in your own home.
  • independent living in your own accommodation in a retirement village, but with support services available onsite if you need it.

Start planning for your retirement

Engaging with a financial advisor to discuss your retirement planning is a wise step towards ensuring a financially secure and comfortable retirement, tailored to your unique goals and circumstances. Please contact us to book in a meeting with one of our Financial Advisors.

This content has been prepared by Wilson Pateras to further our commitment to proactive services and advice for our clients, by providing current information and events. Any advice is of a general nature only and does not take into account your personal objectives or financial situation. Before making any decision, you should consider your particular circumstances and whether the information is suitable to your needs including by seeking professional advice. You should also read any relevant disclosure documents. Whilst every effort has been made to verify the accuracy of this information, Wilson Pateras, its officers, employees and agents disclaim all liability, to the extent permissible by law, for any error, inaccuracy in, or omission from, the information contained above including any loss or damage suffered by any person directly or indirectly through relying on this information.

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