Kaye Fallick

Kaye is a retirement commentator and coach, with 25 years’ experience writing about retirement income. She has authored two books on life stage changes – Get a New Life and What Next? – and enjoys regular radio and podcast appearances. Her favourite mission is to offer plain English explanations of complex rules so that all retirees can benefit. She is based in Melbourne but enjoys escaping to Italy whenever possible.
Retirement income changes: What needs to happen

Retirement income changes: What needs to happen

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Recent findings about the Australian retirement income system show it has taken a small hit in world rankings. A small hit is not a catastrophe, but it does offer a cautionary warning that there may be better ways of helping retirees to help themselves. What are these findings? And how can they be used to improve the way the Age Pension and super combine?

The Mercer CFA Institute Global Pension Index 2024.

Mercer is a global financial services organisation which has conducted research for the Global Pension Index since 2009. It partners with the CFA Institute (Chartered Financial Analysts) to collect information from 48 different nations and analyse these retirement systems statistics for adequacy, sustainability and integrity. National retirement income systems can vary widely, so the Global Pension Index provides a very helpful ‘health check’ to participating nations – and their citizens. Dr David Knox has headed up the Mercer Index for 16 years and he generously shares his insights for Retirement Essentials’ members to better understand what these global rankings mean for individual retirees.

When downsizing goes wrong

When downsizing goes wrong

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A recent article (How fair is the Age Pension) prompted quite a few Retirement Essentials members to share their (not-so-good) experiences of downsizing.

Here’s what you told us (edited for reasons of space):

Helly says no way!

Does your comment that ‘they *CAN* downsize’ …take into account the fact that:

there are almost no suitable residences available to downsize to, in the first place 

the massive cost of actually moving house – particularly if you are older / unable to lift and move things yourself and have ZERO relatives to help you – meaning $$$$$ to pay someone to move everything and 

the massive amount in Stamp Duty plus real estate agent fees plus the cost of doing any repairs required and the cost of modifying the residence you are moving to? 

It is simply not worth the cost of moving – that is why older people stay where they are! You end up losing a lot of money moving, then you have an asset worth less – so your options for reverse mortgaging have decreased dramatically. 

Robyn agrees:

Amen! I ‘downsized’ to purchasing land and building a smaller house with two bedrooms plus a smaller sewing/single bedroom. The cost has been astonishing, as delay after delay has stretched out to 19 months and still not completed. Storage fees, accommodation and other associated costs have made the ‘downsizing’ an expensive nightmare. I cannot apply for a part-Age Pension until final costs are calculated because of daily changes. 

Editor’s Note: If Robyn is eligible for a part Age Pension she should apply immediately and then update Centrelink as her circumstances change. Not doing so will mean she misses out on any Age Pension she is currently eligible to receive.

And Christine feels trapped with two properties instead of one

I am in a similar position. I am stuck with an unfinished house (downsizing), am paying two lots of rates, electricity and water, and living off my savings (fortunately I have some), drawing down my super, but cannot get any pension because the house I am building is deemed ‘an investment’. This build has been going for four years and the builder appears to have no appetite to complete it and there is no redress to this.

These comments caught our attention as they share the very real experience that downsizing has meant for some retirees. And yes, there can be a tendency for those in financial services to suggest downsizing will solve a lot of problems in retirement. And while it is true that leveraging the value of your primary property may translate into higher retirement income, the way you go about downsizing can lead to good – and bad – outcomes. Things can go well, but they can also go very wrong. Today we explore what happens in the latter situation.

But first, a cautionary note – the following overview is not a suggestion that you should not downsize. It is an attempt to share some of the pitfalls of downsizing, so that you can learn from the mistakes of others and avoid them! Downsizing can work very well – but you need to do a lot of homework first.

Back to basics: How the income test works

Back to basics: How the income test works

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Last week we went back to basics by explaining how the assets test works. 

This week we share the ‘second-part’ of this important retirement income update –an explanation of the way the income test is used to assess Age Pension eligibility.

What is the income test?

The income test is one half of the means test for the Age Pension. Applicants must pass both parts of the means test, i.e. both the income and the assets test. If either one of these aspects -income or assets – results in a lower Age Pension entitlement, then that is the test which will determine how much you will be paid.

What does this mean?

Let’s say, under the income test, you qualify for a modest part-Age Pension payment of $200 per fortnight (plus supplements). 

But using the assets test, you qualify for payments of $292 per fortnight (plus supplements). Your actual Age Pension will be paid at the lower rate of $200, based upon the income test results.