Most retirees report their major concern to be whether their money will last as long as they do. But maybe, as the old saying goes, it’s not what you’ve got but what you do with it that really counts. That’s where your financial literacy comes into play. Whether you start retirement with a modest nest egg or more significant savings, it’s how you manage this money across your retirement journey that will matter the most.
You may recall in mid-April we shared a preview of 1 July changes to superannuation.
Since then we have had many members asking questions about the various ways they might use the new contribution amounts to boost their retirement income. It seems that many of these different rules sound either incomprehensible, or you need a white board to start to understand how they relate to each other. Today we look at each of the changes and explain how you can take advantage of these new rules.
As you no doubt know the income and asset limits for full and part-Age Pensions were increased on 1 July this year. This is good news for many Australians who may have almost qualified for the Age Pension. It also means a slight increase in payments. This is because a ‘taper rate’ is applied to both income and assets over the threshold for a full Age Pension while still below the cut-off points. This makes it timely to step through an explanation of how taper rates work, so that you can ensure you are receiving your maximum possible income.
What are taper rates?
Around 2.6 million Australians are currently receiving either a full or a part-Age Pension.
Regardless of which pension you receive, your eligibility is based upon a means test. This means test is two-part, requiring that both your assets and your income are below a certain amount. You cannot comply with just one half of the test and whichever test has a less favourable result is the test by which your payments are defined.