IN THE last budget, changes were announced to the way the Aged Pension is calculated.
Holman McGregor Financial Services planner and director Rob McGregor said the changes can affect those who have or are about to retire.
“The changes will come into play in January 2017 and will result in a reduced age pension for many retirees,” he said.
Rob said two types of retirees will be affected; couples who are homeowners with more than $300,000 and up to $1.1 million in assets apart from their family home; and singles who are homeowners with more than $250,000 and up to $800,000 in assets apart from their family home.
“For non-homeowners, the numbers are higher,” he said.
So how much will they be impacted? Rob said if you fit into the above categories, or will when you retire, it’s best to do your own calculations, which your adviser can help with, but below he outlines two examples.
A retired couple who are homeowners with $800,000 of assessable assets will be around $13,000 worse off per year, while a single retiree who is a homeowner with $500,000 of assessable assets will be around $8000 worse off per year.
So what can you do if you are in the firing line? Rob said its best to first seek professional advice from an expert who may suggest some of the following depending on your individual situation.
“Just because you can do something, doesn’t mean you should,” Rob said.
But some possible solutions include the following:
– You can do nothing and just spend less, or you can do nothing, spend the same and run your retirement funds down quicker.
– You can review your investment strategy and attempt to get a better return that will make up for your lost income (be careful here – get really good advice), or you could gift funds to help you qualify for more (once again be careful).
– You could spend money on your home, which then counts towards the asset test or you could buy a more expensive home to allow you to qualify, possibly with a plan to sell and downsize at a later stage.
But Rob warns, individuals should think carefully and get good information and advice before doing anything.
“Your response should be carefully thought out and fit into your total retirement plan,” he said.
“If you don’t have a plan, it may be worth getting one and if you do have a plan, it will need reviewing.”
Rob will be running a seminar in Noosaville addressing some of the above issues for those who might be impacted on Friday 11 September at 2pm.
Phone Holman McGregor Financial Services on 5449 7200 for more information and to reserve your seat.
