In the last Australian Federal Budget, an amendment to the taxation law will allow eligible Australians over the age of 65 to sell their existing home and put up to $300,000 of the proceeds into superannuation. While it’s pleasing to see tax relief built into the system, there haven’t been any changes to regulations concerning the Age or Service Pension. This means that only some people will be able to take full advantage of the new rules. Some could be worse off financially.
The good folk at YourLifeChoices have just released the next Quarterly Affordability Index. Its aim is to help you understand how much money you currently need to live at various levels and lifestyles in retirement.
There’s no attempt to do the sums involved with granny flats here because each case is different. The aim is to point out the numerous financial issues surrounding Centrelink assessments. This means you need to have a formal, legally drafted agreement in place, referred to as a Granny Flat Agreement.
Earlier this year, 53-year-old hospital worker Mavis Wanczyk phoned her boss and told him she wouldn’t be back at work. Ever. She’d just won the biggest, undivided lottery jackpot in US history. The problem is that Mavis has a 70 per cent chance of losing it all within a few years.
The headline captured my attention: ‘Advisor clients 39% a year better off in retirement—research’. It’s talking about a 39 per cent better income in retirement, which could be the difference between you having a comfortable retirement and one where you struggle.
I mentioned in Part 1 that there are a set of ‘old rules’ that applied before the ‘Living Longer Living Better’ reforms were introduced by the Federal Government on July 1, 2014. Those who decide to live in a Residential Aged Care home enter into a contract with the company. The contracts are different for those who entered a home before the reforms were introduced, and for those who fell under the ‘new rules’.
Most of the important things money can’t buy are obvious, but worth reflecting on. They’re a reminder of life priorities—and retirement priorities.
Almost 20 per cent of over-65s are still working full time or part time in the United States—that’s the highest level for more than 50 years, since 1962. And it’s financially driven, says Jean Setzfand, senior vice-president of AARP, the organisation that did the study.
More than three-quarters of 45 to 64-year-old Australians are ‘running blind’ concerning their retirement finances; half base their understanding of the amount of money they will need in retirement on a ‘total guess’, and a third rely on family members for their financial advice.
Good or bad, you need to know what your financial situation is going to be in retirement. That came home to me after we had spent an hour or so with our financial advisor. Two things became clear to us: Our estimated income in retirement and, importantly, the understanding that with that income we would be OK financially. It wouldn’t be a fancy retirement, but we knew we’d do far better than merely survive.