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Boost retirement income

Boost retirement income

How can you access extra cash in retirement beyond your super and pension?

Once we finally cease work and earned income stops, most of us will be reliant on our super and investments to fund our retirement income, with some help from a full or partial age pension. But what if we have an unexpected need or opportunity arise and need some extra cash beyond our budget? It could be for a new car, a special holiday, medical emergency or just spoiling the grandchildren.

Accessing home equity

If you are over 60, one possibility for obtaining a cash boost is to access the equity you may have in your home via a reverse mortgage. This financial instrument allows you to borrow money using the equity in your home or investment property as security. There are no income requirements to qualify, although lenders must still take a responsible approach and assess the borrower’s situation before offering the loan.

Interest is payable just like a normal mortgage, although repayments are optional and can be left to compound until you eventually decide to sell, at which time the loan and interest must then be repaid.

Proceeds of the loan can be taken as a lump sum, a regular income stream, or a line of credit, depending on what suits your purposes.

While reverse mortgages have some attractions, they do represent a significant long term commitment and you need to consider the impact may have on your family relationships and stress levels. There may also be impacts on your pension entitlements to be considered.

Pension loans scheme

If you only have a relatively small need for extra income, another option may be to apply for the Pension Loan Scheme. These are offered via the Department of Human Services and the Department of Veterans’ Affairs and offer an economical way to top up your age or veteran’s pension. The interest rate is generally significantly lower than commercial equity release loans.

Proceed with caution

Before entering into any arrangements like this, it is wise to seek advice from your adviser to help assess if it is right for you and to ensure that you are fully aware of the risks and responsibilities involved.


Part-time work in retirement

Part-time work in retirement

Retirement is a goal we all look forward to, but many of us like the idea of continuing to work part-time in retirement as a way of keeping stimulated and socially connected, as well as supplementing income. If you choose to do this, however, it is important to be aware that it may impact on your age pension entitlements.

Be aware of the limits

Fortunately, the government does allow some level of income to be earned without impact on the Centrelink or the Department of Veterans’ Affairs pension. A single person is permitted to earn up to $162 a fortnight, while couples can earn $288 a fortnight.

Once income exceeds these amounts there is a sliding scale of reduction in the pension. Every dollar earned in excess of the threshold will result in a reduction of fifty cents off the pension for singles and twenty five cents for couples.

Extra benefits from the Work Bonus

As an added incentive, the government has also implemented the Work Bonus Scheme to benefit those who are earning income as employees, (the scheme is not available to self-employed). The scheme allows you to earn an extra $250 per fortnight, over and above the earning limits described above, without it being assessed under the the pension income test. That equates to a substantial total of $6,500 per year.

An important feature of the Work Bonus Scheme is the way it caters for those who may only be working occasionally. The scheme allows you to accrue the $250 per fortnight limit during the times you are not working and then lets you apply the accrued allowance during periods when you are working.

Hypothetically, you could have no employment for the first nine months of the year and then work part-time for the final three months of the year and still gain full benefit from the scheme by being allowed to apply the full annual limit of $6,500 all within those last three months.

Remember, Centrelink and the Department of Veterans’ Affairs will also look at the value of your assets when calculating how much pension you receive.

Planning retirement income

If you want to know more, talk to your adviser, who can help you coordinate your income mix to ensure you maximise your entitlements.


How to choose a retirement village

How to choose a retirement village

Australia has over 2,200 retirement villages which cater for over 5.7% of the over 65 population. The idea of hassle-free living in a community setting is appealing to many, but how do you go about selecting the village that is right for you?

Retirement villages provide the attraction of combining an independent living space with shared facilities and services. They generally provide a feeling of security, increased opportunity for social contact and access to a variety of lifestyle activities.

If you or someone you care about is considering making the move to a retirement village, there are a range of issues to examine and compare in order to make a sound choice of village to meet your needs. Here are some of the more important ones to keep in mind.

Are you prepared for the change?

If you have been in your current home for some time, making the move can be quite an upheaval. That makes it imperative to give some thorough consideration of how your life will change in a new location. Will access to family and friends be more limited? Will you be able to readily source medical, health and recreation facilities and services that you want and need? How handy is the prospective village to shops and public transport?

Quality of life within the village

You need to be satisfied about the quality of the village’s property, amenities and service. This begins with the physical aspects of the buildings and how conducive the village set up is to a worry free lifestyle. Is there sufficient privacy for your unit/villa? Are common areas well-appointed and appealing? How well kept are the gardens and traffic areas? Are there noise issues coming from main roads or public places, such as clubs and shopping centres?

You also need to look deeper into the ‘vibe’ of the village. A good barometer for this is the happiness and friendliness of the people who live and work there. Talk to staff and other villagers and see how welcome they make you feel. Don’t be afraid to ask direct questions about the best and worst characteristics of living there.

Your quality of life is also impacted by how accommodating the village is to the people and activities that are important to you. Does the village have rules on pets? Does it have adequate provisions for entertaining family and friends who visit? Are there a variety of facilities, such as a library, bar, café, dining room, sporting facilities and social programs?

Understand the financial commitments

It is vital that you get a firm grasp of the financial aspects of living in the village. This should include gaining a complete picture of not just the upfront costs, but the ongoing maintenance fees, upkeep costs that the resident is responsible for and exit fees and capital gain sharing arrangements if you ever decide to leave. Don’t take anything for granted and be upfront in asking for documentation that can be scrutinised by financial and legal professionals. It is unlikely that you will be able to fully understand all the contractual and financial intricacies, so employ some professional assistance to make sure that there are no surprises down the track.

What about the future?

While you may well expect to spend a considerable time residing in the village, eventually there may be health or ageing issues that require a change in living situation. Check what the village offers in terms of medical or emergency support and how it caters for added services, such as cooking, cleaning and laundry. Such services may make a big difference in how practical it is to ‘age in place’. If movement to higher care accommodation becomes necessary, does the village have transition arrangements and what are the costs involved?

We are here to help

If you are considering the possibility of a retirement village, it’s a good idea to consult your adviser to assist with the financial aspects and to help refer you to the appropriate professional.


Design your ideal retirement

Design your ideal retirement

To drive your financial plan for retirement it is vital to firstly do some specific planning about your retirement lifestyle.

The best way to do this is to put financial issues aside for a moment and just focus on lifestyle goals. Start by brainstorming with your spouse on things such as activities, hobbies, socialising and travel.

Then, there are other issues that need to be considered too, such as family connections and whether you want to spend more time with children or grandchildren.

Residence and location is another major factor to be thought through. Will you want to downsize or move to a more recreationally oriented suburb or town? Perhaps you want to live closer to family too. The types of amenities you will want to enjoy are also important, such as clubs, sporting facilities, transport services and health facilities.

Envision a future to drive your finances

It’s only when you have projected your lifestyle desires and choices that you can start to consider the practicalities of how you can structure your finances. Of course there is the daily cost of living to be funded, as well as access to money for discretionary or lifestyle spending.

Then there are also the one off expenses, such as overseas travel, to be considered.

Planning a budget and the timing of ‘big ticket’ items will then feed into how you structure your investments and income streams. Potential age pension entitlements need to be factored into the mix too.

Don’t leave it until it’s too late

The benefit of doing this process in advance is that you can model how well your superannuation and other investments are faring, in relation to how much you will need.

Every person’s situation is different and the complexities of superannuation, investment, debt reduction, social security and taxation makes it important to enlist expert assistance to help manage the situation and map out the future.

Talk to your adviser about how they can help you design your ideal retirement.