The age pension is available for older Australians. To be eligible you must pass an income test and an assets test. Any age pension benefits you are eligible for will depend on your income, asset base and current circumstances when you apply. Therefore your age pension entitlements will vary based on your own individual situation. To confirm how your assets affect your eligibility you can use an age pension asset test calculator.
This table, courtesy of Human services website, shows the current limits for age pensions.
|Per fortnight||Single||Couple combined|
|Maximum basic rate||$808.30||$1,218.60|
|Maximum Pension Supplement||$65.90||$99.40|
It’s worth noting that the maximum income available for a single person is only $23,095 while a couple only gets $34,819 and it will decrease depending on your circumstances. Any age pension increase is decided by someone else, meaning you have no control over what money you have available to spend or what rules the Government will put into place.
Could you really survive on this amount?
What part of your current lifestyle will you be forced to give up?
Given what we have just learnt, here are our 5 Facts for Investors about Age Pensions
- The Aged pension is not enough to provide a comfortable lifestyle – The Age pension is designed to support your retirement income stream, it’s not a substitute for it. If you thought any differently take the opportunity now to confirm your retirement plans. In fact, most investors understand this and they are already actively creating a portfolio of investment properties. Take the time to revisit what you want from a retirement income. It’s been obvious for some time that the Age pension will not support your pre-retirement lifestyle.
- Success means no pension – Let’s be honest here. The whole point of being a successful property investor is to create a comfortable retirement. Succeeding in this endeavour will inevitably mean your financial position is outside the eligibility scope of the Age Pension. For example, if you structure your property portfolio for income from rent you most likely will fail the income test.
If you structure the portfolio for growth you will most likely fail the asset test. Either way, you have created a comfortable retirement that you are happy with. The fact that you may not be able to get an aged pension is not a bad thing compared to that.
- Asset test will penalise investors – Accumulating multiple properties to provide post retirement income makes perfect sense. Achieving this goal gives an investor independence to create the retirement lifestyle they choose. Unfortunately, it won’t take many properties to exceed the age pension asset test. This then raises the dilemma of debt vs income. If you decide to keep the debt in order to overcome the asset test, the income will be required to service the repayments meaning you have less to use for your retirement.
- Lifestyle comes from abundance not dependence – A life of dependence is not success. At the moment there is a mentality of entitlement, as though one should be given something without working for it. The biggest problem is that an attitude of entitlement leads to a life of dependence. An investor should be above these petty thoughts. You should start planning now to demonstrate that independence is worthy of pursuit. A lifestyle of abundance built from opportunity and hard work creates positive examples for others to follow. The Age pension can’t be viewed as a success but it is necessary to be able to assist those that need it.
- Plan now – The only way to remove any dependence on Government assistance is to create a passive income for yourself at retirement that will meet or exceed your lifestyle aims. A Financial Planner is vital to set up your future with that goal in mind. Using a Financial Planners expertise to create an achievable goal and keep you accountable is a corner stone of wealth creation. A Planner is there to show you how to achieve your personal goal for retirement. The alternative is the Aged pension.
Do you really want to be dependent on the Government deciding your lifestyle? Maybe a few changes to the way you look at your finances now could provide a more pleasant outcome in the future? We would love to discuss how to make retirement the best time of your life.