Do you know what retirement has in store for you?
Australians are now living approximately 10 years more than we used to at least 50 years ago.
We also stay more active and fit after retirement.
This also increased various retirement expectations, such as developing a new skill, spoiling the grandkids, or traveling overseas.
It is essential to boost your retirement income to make sure that you achieve those retirement expectations and lead an independent, happy and good life post-retirement.
Some of the lifestyle changes may affect self-funded retirees, but most of them relate to the ones with Centrelink entitlements.
Following are the three significant changes introduced in this field with effect from 1st July 2019.
Residents receiving Veterans Affairs pension or an age pension can now earn $300 in a fortnight instead of $250. This will not impact on your Centrelink payment.
There is also an income test free area amounting to $174. So, if you are single, you may earn almost $472 every fortnight without affecting your pension.
The rule for work bonus is applicable both for self-employed and employees.
You may not need to earn $300 every fortnight.
Instead, you can collect the unused work bonus of up to $7800, which was previously $6500.
You can use this amount to start a business in the future.
For example, if you don’t work for a year, your unused work bonus will amount to $7800.
Subsequently, if you get a contract work for approximately six weeks, you can earn $4000. The remaining $4000 of your work bonus will be used so that it doesn’t affect your Centrelink payment.
This process not only helps to improve your retirement income but also ensures that you can work without any doubts in your mind.
A change in the Pensions Loan Scheme indicates that citizens can use the equity reserved for their home.
The rule to offer a fortnight loan to increase income is now applicable to all self-funded retirees and pensioners.
According to the loan experts at Max Funding, this offers greater lending power. “This rule also allows you to borrow a maximum of 150% of your fortnightly pension so that you can lead a better retirement, which was previously only 100% of your maximum fortnight pension. It’s always important to consider if it’s something you can sensibly afford with your lifestyle.”
However, you will get this amount only by keeping your property in Australia as a mortgage.
You can repay the loan any time you want. But most people usually pay the loan while selling their property.
Presently, the retirees have to pay an annual compounded variable interest of 5.25%.
The government started a reverse mortgage scheme to support this policy. This type of loan is aimed to reduce your home’s equity but will provide sufficient cash flow during your tougher times.
The income streams for pooled lifetime retirement also went through several changes, including lifetime annuities in both deferred and super lifetime annuities and regular lifetime pensions.
The government defines annuity as a scheme where people accumulate their money along with other investors, and you get a specific amount as payout at the end of each year.
This continues for your entire life until you die. However, these changes don’t apply to annuities or account-based pensions before 1st July 2019.
According to the new government rules, Centrelink will treat as much as 60% of your annual annuities as your income.
Apart from yearly annuities, it will consider 60% of your nominal purchase price until you are 84 years for at least five years. After that, it will assess 30% until you die.
Experts believe that although the 60% rule may increase your income in some cases, there are times when it won’t suffice your needs.
If you are planning to consider an annuity, you can get in touch with us to consult which option is best for you.
Usually, the government sets your annuity interest rate during the time of purchase.
You should buy them when the interest rates are relatively lower. Investing a part of your retirement savings in annuity will provide a guaranteed income in addition to the Centrelink payments that work as superannuation according to the account-based pension.
However, that may not last for a long time.
For the meditation expert, Jo Amor, it’s important to always consider our needs and plan around them, especially in retirement. “With this modern life, stress and fatigue builds and causes our happiness to vanish, along with our ability to cope with life’s challenges. We must find a way to rest and recharge quickly and integrate silence into the busyness.”
All these changes will help to provide stable sources of income after your retirement.
If you would like to discuss these options, don’t hesitate to get in touch with a WealthPath team member today.