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Planning to retire – life begins with …


Once you exceed your base income and assets, things can get confusing. Noel Whitaker helps you plan for retirement.

The last six-month adjustments to the old-age pension have taken place and come into force on March 20, 2021. The main change is a small increase in the old-age pension, which also leads to an increase in the cut-off points for both the asset test and the income test. The maximum pension for one person is now $ 952.70 in two weeks, and for a couple – $ 718.10 in two weeks.

Everyone is allowed a certain basic level of income and assets, but if the basic level is exceeded, the pension decreases. In order to check income, the pension is reduced by $ 0.50 for every additional dollar earned above the threshold, and by three dollars in two weeks for every $ 1,000 of assets that exceed the lower limit.

The lower asset limits are $ 268,000 for one retiree and $ 401,500 for a couple. After exceeding these levels, the pension is reduced until it reaches the upper limit where the pension is not paid. The base income threshold is $ 316 for two weeks for a couple and $ 178 for two weeks for one.

The cut-off point for a couple of homeowners rose to $ 880,500, and for one retiree – $ 585,750. For non-homeowners, the figures are $ 1,095,000 and $ 800,250, respectively. Marginal profit test points are now $ 82,898.40 per year for a couple and $ 54,168.40 for a single.

How do you qualify? First, you must be of retirement age, which depends on your date of birth. For people born between January 1, 1954 and June 30, 1955, the retirement age is 66 years, for people born between July 1, 1955 and December 31, 1956 – 66.5 years, for those born between born January 1, 1957 or after – 67 years.

If one of the partners is eligible and the other has not reached retirement age, the eligible partner receives half of the couple’s pension. For example, a 67-year-old man with a 59-year-old partner can claim 50% of a couple’s pension.

You are tested for both assets and income, and Centrelink applies the test that gives you the lowest pension. Consider a couple of homeowners with an income of $ 700 in two weeks and a valued asset of $ 740,000. Their pension according to the income test will be $ 622.10 for two weeks each – according to the asset test – $ 210.35. Thus, they will be eligible for an old-age pension of $ 210.35 for two weeks

The value of your assets does not include your family home, while your movable property, such as furniture, cars and boats, is valued at second-hand value, not at replacement cost. That puts the $ 5,000 figure on most people’s furniture.

If the value of your investment has decreased, your payment may increase – if the value of your investment has increased, your payment may decrease.«

The income test includes items such as income from employment, pensions abroad and rent received – financial assets are considered estimated income. It is estimated that they earn 0.25% for the first $ 88,000 ($ 53,000 for singles) and 2.25% for the rest. For example, if the pair had $ 488,000 in financial assets, their estimated profit would be $ 9,220 per year, which is 0.25% of the first $ 88,000 ($ 220) and 2.25% of the $ 400,000 ($ 9,000). dollars).

The term “financial assets” includes interest-bearing deposits, stocks, managed funds and retirement money when a member of the fund has reached retirement age, but it does not include assets. The value of the property less any mortgage on that property is used to test the assets, and the net rental income after expenses is used to test the profit.

The income test doesn’t matter if you pass an asset check. For example, one person with assets of $ 540,000 and receiving a pension of $ 136.70 for two weeks may receive income of $ 45,000 per year, including estimated income and income from work, without affecting the pension because they assets will still be tested.

Accrued rates are a gift for people who have money in highly efficient pension funds, which averaged 8% per annum. There is no penalty if your assets can achieve better returns than return on estimated rates.

Each year on March 20 and September 20, Centrelink evaluates your market-related investments, such as equities and managed investments, based on the latest unit prices. These investments are also revalued when you report a change in your investment portfolio or when you request a revaluation of your stocks and managed investments. If the value of your investment has decreased, your payment may increase – if the value of your investment has increased, your payment may decrease.

Rules in favor of retirees. If the value of your portfolio arises due to market movements, you should not notify Centrelink of the change – this will happen automatically when you re-evaluate the next six months. However, if your portfolio falls, you have the option to notify Centrelink immediately.

You can reduce your assets by giving away some of your money, but seek advice before doing so. Centrelink rules allow you to make gifts for only $ 10,000 per fiscal year with a maximum of $ 30,000 for five years. Using these rules, a prospective retiree can donate $ 10,000 before June 30 and $ 10,000 immediately thereafter, and thus reduce their assessed assets by $ 20,000.

The rules are simple at first glance, but there is a devil in the details. If a member of the couple has not reached retirement age, it is prudent, if necessary, to keep as much pension in the name of the young person, because then it is not subject to Centrelink assessment. However, when this fund is transferred to the pension regime, it is accrued regardless of the age of the member.

In addition, indebtedness on an investment asset is not deducted from the value of the asset, unless the mortgage is retained in respect of the investment asset. It is not uncommon for people to have large mortgages secured by their home, for investment property – in which case Centrelink estimates the gross value of the property and does not deduct the loan.


Noel Whitaker
Noel Whitaker is the author of The Right Retirement and many other books on personal finance. His advice is general, and readers should seek their own professional advice before making any financial decisions.
E-mail / noel@noelwhittaker.com.au
Website / www.noelwhittaker.com.au


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