Are you financially ready to retire?
Of all Australians 66 years or older, only 45% were receiving any Age Pension in 2018 according to the Department of Social Services. The Full Age pension was being received by just a quarter of these pensioners.
To get the maximum payments made by Centrelink every two weeks, it is now more important than ever for pensioners to evaluate the structure of their income and assets. It is especially important to consider the changes made to the Age Pension asset test.
Want to increase the amount you are entitled to through your Age Pension? There are several changes you can make to the structure of your income and assets.
Knowing these tweaks can be the difference between scraping by in retirement and living comfortably.
As it stands, each single Australian eligible for the Aged Pension receives $926.20 while couples get $1396.20 (combined) every two weeks.
However, the value of your assets and level of income received from other sources determines whether you get the full pension amount or just a part of it.
So if you want to receive the full Aged Pension, here are the top tips you need to know about.
What Are Assessable Assets?
The value of all your assets abroad and in Australia (if you are eligible for the Age Pension then your superannuation is also included) is evaluated by Centrelink.
During the assessment, all properties & assets are taken at market value, and not replacement value. However, your principal place of residence is not counted as part of your assets. The amount of pension you receive decreases if the value of your assets is above a certain limit.
Couples that do not own their home can still get a part pension with assets worth more than $1 million dollars. While those who own their own home still qualify for part pension with assets worth $860,000.
What Is Assessable Income?
Any income including: money that you salary sacrifice, annuities/pensions, income from employment and income from any investments abroad, is included in the income test.
A common misconception among pensioners is that they are ineligible under the income test if they are at all working. This is not true.
However, the first $300 of income earned each fortnight is left out of the income test as per the Work Bonus scheme. Furthermore, before your age pension is affected, you can also earn an additional $308 dollars every fortnight.
However, every dollar earned over and above this $608 dollar fortnightly total leads to a 50 cent reduction of the age pension by Centrelink.
Increase Your Part-Pension Payout With These Tips
Structure your assets
The designation of asset ownership among the parties in a couple can have a significant impact. So it’s important to structure your assets properly.
This is especially important in cases where one party in a couple has attained the pension age while the other is not yet eligible.
For example – Is your partner’s superannuation not included as part of your combined assets? It might make sense for you to boost their super for as long as they remain below the age of retirement.
Pensioners are allowed to give out as much as $10,000 annually in the form of gifts to friends or family. This can be used to reduce the value of assets included in your asset test.
The cladding team from DC Cladding explain that “you can also reduce the value of assets to be considered under the asset test by investing in home improvement projects meant to make your home more comfortable, if you already own it.”
Additionally, any money spent towards meeting the cost of a holiday abroad will be deducted from the value of assessable assets.
With more expert advice, the team from Perth Cremations notes that “funeral costs are unavoidable; but pensioners can reduce the value of their assets by buying a funeral bond or making prepayments on the costs as well. The steps you take now are not only good for your own financial health, but make sure everything is taken care of in the future too.”
Remember to notify Centrelink of any significant spending or changes to the structure of your assets, be it drawing down or selling shares to your supper or any of the above mentioned examples, as soon as possible.
If you are making huge withdrawals from your asset portfolio, be sure to notify Centrelink within 14 days, even though you are only required to submit an update of your assets annually.
Boost Investment Income With Deeming Rates
Income drawn from other retirement income or from income on term deposits and bank accounts or any other similar investment is assessed by Centrelink by deeming the return on it.
For the first $86,200 (for couples) the deeming rate is set at 1.75%, rising to 3.25% for income over this level.
Regardless of the real return on the listed investments, these are the figures used. Pensioners need to get the best possible return on these investments, especially with new lows on term deposits and savings.
Earn More Benefits Through Concession Cards
Consider getting a concession card even if you do not get the Age Pension. You can enjoy a variety of benefits, including assistance with meeting medical costs.
If you do not qualify for the Age Pension but have reached retirement age, consider getting the Commonwealth Seniors Health Card. This is designed to help retirees meet the cost of a variety of health services and medication.
Chronic pain experts explain “the older you get, the more likelihood you’ll need access to medical services. Any step you can take to make these more accessible and affordable should be seen as a positive step in your retirement.”
To get concessions on healthcare, and any other concessions provided by territory and state governments and local administrative government units, as well as reduced medication costs, consider getting the Pensioner Concession Card.
Looking to make the most of your retirement? Chat to the expert team from Wealth Path to retire with your finances under control.