Thu, 24 Jan, 2019
How to self-fund your retirement
With the social security system under increasing pressure from an ageing population, self-funded retirees may feel like they are being snubbed when it comes to government support. After faithfully paying taxes all their lives, it seems only fair that they should receive some level of support to assist with certain needs.
Fortunately, there are some avenues where support is available — if you know where to look. We explore some options that can help put you on the right track.
Commonwealth Seniors Health Card
This card entitles the holder to a wide variety of concessions, including low cost health care, and potential discounts from state or territory governments and local councils for utilities, rates, and public transport.
The card is available to those of age pension age. There is no asset test but you are subject to an income-based means test. Currently, to pass the income test, you must earn no more than $53,799 a year if you’re single, $86,076 a year for couples, and $107,598 a year for couples separated by illness, respite care, or prison. Add $639.60 to these amounts for each child in your care.
State Seniors Card
This card is issued by each state and territory, though it can be used interstate for some businesses and services. The benefits vary in each state but are generally quite substantial. Generally speaking, if you are over 60 and work less than 20 hours per week, you will qualify. The big plus is that it is not means-tested — this makes it well worthwhile for self-funded retirees to investigate further.
Discounts can include public transport and government concessions, as well as reductions from participating businesses on such things as holidays, travel, hospitality, automotive service, professional services, and shopping. Check your state’s seniors card website to get specifics on discounts and periodical special offers.
Pension Loan Scheme
This may be an option for retirees who are excluded from the full age pension due to the income and assets test, and have substantial equity in their home or in an investment property. By using your property equity as security, you may qualify for a non-taxable loan to boost income.
The loan amount is not provided as a lump sum, rather as a fortnightly payment which can be up to the equivalent of the age pension. This can be an efficient way to translate some of your assets into usable income without having to sell your property, but you do need to think seriously about the impact of the loan and interest charges eroding your home equity.
If you have a partner in need of care, you may be eligible for a carer payment but it is dependent on an income and assets test. Provided the person receiving care does not get a pension, you may qualify if their income is less than $112,006 a year and their assets (not including their home) are less than $691,000.
Department of Veterans Affairs
The Department of Veterans Affairs may provide benefits such as health cards and income supplements to veterans, and their widow(er)s and dependants. Details about eligibility and compensation are outlined in the benefits and payments section of their website.
Commonwealth Home Support Programme
This program is designed to provide assistance for those who may have difficulties with everyday activities, but want to continue living in their own home as independently as possible. Self-funded retirees are subject to a financial assessment to determine whether an income-tested care fee may be required.
Planning ahead is always the best option
While accessing support in retirement is always helpful, there is no substitute for creating your own financial independence before you retire. To do that successfully, you need to consider questions such as:
- Can I afford the lifestyle I want?
- How much will be enough to retire on?
- How can I best invest to maximise my retirement savings?
- How can I structure my financial affairs to maximise social security entitlements?
- What can I do to improve my retirement savings before I retire?
These questions can be quite daunting and complex to answer, so how should you tackle them?
Planning retirement is like planning a holiday
Think of how you go about planning a holiday: you pick a destination, decide what sights you want to see, work out a daily spending allowance, choose the accommodation, and book your flights. Typically, you would use the skills and resources of a travel agent to help get the best prices, and to determine the overall cost, so that you can plan how much you need to save and to ensure your trip goes smoothly. Trying to go it alone could turn your dream escape into a nightmare.
Planning your retirement works in a similar way. Talking to a financial expert can give you the guidance you need to assess your ongoing income needs, as well as all the other lifestyle costs that you want in your ideal retirement — such as holidays, recreation, and special purchases. They can then project how much you need to save and assist in creating an appropriate investment strategy to get you to your retirement “destination” securely.
In many ways, retirement is just like a never-ending holiday, so it is essential to plan it professionally to maximise your enjoyment and maintain your living standards.
What do you look forward to most about retirement? What do you worry about most? Share your thoughts below.
Republished with permission of Wyza.com.au.