How you will fund your retirement often determines when people decide to retire. If you need to factor in an aged pension to put a base in your income each year and then looking to maximise this could be key.
Lets met Don, he is 66 and is aware he could retire soon and is not sure if he would be entitled to an age pension or what his income level would look like or how long his super would last him. Don currently earns $87,000 p.a. and has $380,000 in super, has a car and caravan valued at $45,000 and has just finalised his home loan. Don has a very low tolerance to risk and fears running out of money in retirement. He is concerned about the markets going through a GFC or COVID event and what that would do to his income. Don believes he would be comfortable on $60,000 pa. On current analysis Don would not receive a full aged pension because he is over on his asset’s threshold.
What worked for Don was looking at ways to maximise his age pension entitlement and have him keeping pace with inflation on a regular income amount. We were able to do so with a guaranteed income stream for life which adjusted his asset assessment and was then entitled to a full age pension. We also used a capital protection product on a portion of his retirement savings over the next 10 years to prevent any downside to these funds while allowing him to be well invested without worrying about what the markets are doing. Overall Don achieves the goal of mitigating risk, remaining well invested and with a full age pension he draws less from his super. We were able to demonstrate to Don that he could fund his retirement beyond his life expectancy. Plus, we left the plan B option that if Don needed extra money later on he can downsize his home providing further funds to be available, that’s his parachute if he needs it! Life looks good, and Don can stop worrying and get on with enjoying his retirement years!
Australians can retire anytime however when they reach their age Pension age, this can vary from 65 to 67 and they may be entitled to receive an aged pension.
