A baby boomer complained that she does not want her pension cut even though she has nearly half a million dollars in assets and owns her own home.
The 75-year-old woman said Western Australia He feared that his biweekly retirement pension payments would be reduced because he was set to inherit $300,000.
She explained that she had $160,000 in a pension fund based on a retirement account.
“As my age does not allow me to increase my retirement fund, could you please advise me on what options I have to optimise my cash flow, including my old-age pension, and whether there is any grace period to decide how to restructure my finances?” he asked.
Columnist and financial planner Nick Bruining estimated the woman also owned a car and its contents, adding $30,000 to her assets.
He said the $300,000 inheritance would bring the total sum to $490,000.
“This puts him approximately $176,000 over the sole proprietor asset test threshold of $314,000 and he will likely lose approximately $528 every two weeks of the full rate of $1116.30,” he wrote.
Mr Bruining suggested the woman could use the money to make investments, such as renovating her home, to take advantage of a loophole under which the family home is exempt from the assets test.
A baby boomer has complained that she does not want her pension cut despite having almost half a million dollars in assets and owning her own home (file image)
“By spending money on your home in this way, you are actually transferring money from an assessed asset (a bank account) to an exempt asset (your home),” he wrote.
Bruining said the woman could also spend the money on a lavish vacation or fund the cost of her funeral.
“You can also invest money into a special funeral bond fund where the money is only released after your death,” he wrote.
‘Up to $15,500 invested in this way is exempt from the Centrelink means test.’
A single pensioner is now entitled to receive $1,116.30 per fortnight if he or she earns less than $212 within the same time period.
An income of more than $212 per fortnight automatically reduces the pension by 50 cents for each dollar above that figure.
“You might also consider upgrading your car. While the value of the new car is still an appraisable asset, the value depreciates immediately,” Bruining said.
‘You can use the private sale value of the car for Centrelink purposes, which can be up to 20 per cent less than the amount you paid for it.’
A single pensioner is currently entitled to receive $1,116.30 per fortnight (file image)
Data from Super Consumers Australia estimates that $279,000 is enough for a modest retirement for a single person, provided they own their own home and limit their annual spending to $41,000.
The figure is slightly higher for couples: $371,000 is needed if they expect to spend $60,000 each year.
A person’s family home, also known as their primary residence, is exempt from the asset test if they live in it or have been out of the house or apartment for less than two years.
But once they sell, the money from the sale is considered part of the asset test.
Investment properties, including those that are rented, are also included in the government’s asset test.