Last week we talked about the role of the Age Pension as the foundation of most Australians’ retirement plans – even for those who are not eligible when they first retire.
But most people would like a higher income in retirement than the Age Pension provides. That’s where super and your other investments come in.
Let’s take a look at three retiree couples, with different savings levels and see how much of their lifetime income comes from the pension. They’re each 66, want to retire at 67, and they each want to spend $45,000 per year. The first couple has $150,000 of savings; the next couple has $550,000 in savings and the third couple has $950,000 in savings. We’ll assume half of their savings is in super and half is in nonsuper.
Can they meet the $45,000 spending sustainably? Where will it come from? We use our Retirement Income and Spending calculator to answer the questions.
Their spending level
First, can they each spend $45000 per year adjusted for inflation and have it last till at least age 90? Our calculator looks at what might happen in different investment conditions: in good markets, in moderate investment markets and under poor market conditions.
Couple A has just $150,000 in super and investments. They are entitled to the full age pension worth over $37,000 in the first year. But the calculator shows their investments are unlikely to go the distance if they want to top up to $45,000 per year. In good markets, they may sustain spending at $45,000 till they reach 85 or 86, when they’d drop down to the Age Pension amount. But in poor market conditions, they may run out of super and investments by age 78.
Both Couple B ($550,000 in assets) and Couple C ($950,000) can easily make the target income level of $45,000. Even in bad markets they have enough with the Age Pension to last till 90. In fact they both have money left over at age 90 – that might be good for their heirs…or maybe they could re-examine their forecast and decide to spend a bit more along the way. Couple C could afford to spend quite a lot more.
Where did the money come from?
Couple A got the full age pension from the beginning. And that made a big difference. Couple B was entitled to a part age pension, just over $25,000 from the beginning. But their pension increased steadily as they spent down their investments and super. By the time they were in their late eighties, they were receiving very nearly the full age pension.
Couple C didn’t qualify for the Age Pension at first – they were above the assets test threshold (so, we helped them get the Commonwealth Seniors Health Card in the meantime). But within a year or two the Age Pension started to kick in for them too, as they spent some of their investment monies. By the time they were in their late eighties, the Age Pension was paying them $30,000 per year.
While many people don’t think they will benefit from the age pension, and they often don’t at the start of their retirement, the government’s own research shows that 80% of people are expected to be on the pension by age 80.
What does all that look like?
| Couple A | Couple B | Couple C | |
| Starting Assets | $150,000 | $550,000 | $950,000 |
| Can they spend $45,000 per year until age 90? | Probably Not | Yes | Yes |
| The Age Pension | They get a full age pension from the beginning | They start with a part pension which grows over time | No pension at the start however a part pension kicks in over time |
| Their Investments | Their investments helped for the first 10 years or so but didn’t last the distance | Their investments made a big difference but didn’t contribute quite as much as the age pension | Their investments were the most important component of their retirement income but later in life the age pension contributed half their income |
The lesson is that both the Age Pension and your super and investments are key ingredients determining how much you can spend in retirement. And that the Age Pension gets better with age while, for most of us, as we spend our savings to meet our lifestyle needs.
If you’re not on the Pension or you’re on the partial Age Pension, it pays to check out our Age Pension Eligibility Calculator to see your current entitlements. You can find that here.
So tell us a little about your experience. Are you on a full age pension, part pension or no pension at all? And if you are on a part, or no pension, how do you think that will change over time?
Would appreciate similar comment/example for single pensioner too.
Thank you
Hi Sue, thank you for your feedback and we will definitely take this on board for future topics. If you would like to discuss your individual situation in more detail please email hello@retirementessentials.com.au and we can arrange a 30min phone consultation.
I have been living in Australia since January 2016 and received my full residents visa in October of that year. Between a uk state pension and a small works pension I receive approximately $1,500 a month in income depending on exchange rates.
I have never worked in Australia and live with my daughter and her husband. I am divorced.
Will i qualify for a pension from Australia.
Hi Rona, Centrelink’s residency criteria to be eligible for an Australian Age Pension is that you need to be a citizen/permanent resident for at least 10 years and 5 of those 10 years need to be consecutive. Based on what you have advised you would not be eligible for an Age Pension until October 2026. You can potentially apply for a Commonwealth Seniors Health Card (CSHC) though as the criteria is different, we will send you an email separate to this comment with details on how we can potentially help you to apply for the CSHC.
Thankyou. I am grateful for the information. Rona
It may also be possible for you to receive a lower income health care card (LIHCC) as well, depending upon deemed assets and other income. This may entitle you to discounts on rates, utilities bills and some state services. (In Tas, it’s about $2 a day off utilities, for example.)
Hi . I m getting half pension at the moment, due to have grannyflat income. And my wife age 63 still working park time .
I have $80000.in term deposit. My super about $28000. So what’s your suggestion.
Hi Sunny, we will send you an email separate to this comment with details as to how we may be able to assist you via a one on one phone consultation so we can discuss your situation in greater detail but also in private.
Will benefit if you have a discussion on various types of investment and their effect on age penion amount. For ex, investment in real estate vs in cash vs in super account.
Maybe what a lot of people need to know is that if you are on the pension and say your partner is 5 years younger than you can be entitled to the full age pension. If you keep say less than $250k in your account and place more funds into the younger persons account then their super is treated differently until they reach pension age. As log as their account is not an income stream but left as a Super account and you are below the asset and income thresholds.
I too would appreciate a single person example of the same amounts
Baz
My wife aged 61 and I aged 72 receive a full aged pension, I receive a veterans affairs disability pension and my wife also receives the carers allowance
The annual total of these pensions is approximately $80,000
My wife will shortly receive a part inheritance of $170,000
This will mean our assets will be higher which will affect the aged pension
I understand that my wife does not have to declare her super in the asset test until she reaches the pension age of 66
Would it be possible to transfer my super into her super to avoid the reduction in the pension
Cheers
Chris
Hi Chris. Your understanding is correct in that a partner’s super isn’t included in the age pension asset test until the partner reaches age pension age. Depending on where the partner sits in regard to their contribution thresholds it may be possible to contribute a lump sum to the partner’s account. This could be from an inheritance or from a withdrawal from the other partner’s super. Your situation is a bit more complicated as you also receive a veterans affairs pension and your wife receives a carer’s allowance. You should speak to a financial adviser to see what might be best for you in your circumstances.
Can you receive a full aged pension, and a veterans affairs disability pension
Ok here goes with our financial situation being a little complex. Firstly we own our home worth around $1.4 million with no debts.
My Super balance is $170,000, low because at 67 l paid out our mortgage when l retired and my wife at 61 has Super of $70,000.
l receive $500 out of my Super each fortnight, $1,900 a month from a Directorship and $400 from a part pension. My wife receives $700 a fortnight from a part time job.
This all adds up to around $65,000 a year to live on which leaves us a little short needing around $75,000 a year to maintain our life style.
So how can we increase our annual income from this position if at all?
That is a reasonably complex situation, Steve. You will want to check the sustainability of your spending amount over your lifetimes. As your assets and income decline, your Age Pension will likely increase. And you have a great asset in your mortgage-free house, which gives you options (such as Pension Loan Scheme or private reverse mortgage). A little financial advice might be needed.
Hi, It would be nice to discuss the PLS system with people who instead of having cash or super have investment properties worth $550,000 or $950,000.
Thank you
Thank you for the great information you provided to the retirement age group and let them understand how their financial future will be for many years a head .
I too will appreciate if you provide topic for people having low partial pension because their partner still having good income from a full time job .
Thanks.
Hello Jeremy, Thank you for ‘teaching us’ how to manage our retirement income. No doubt it is very useful.
Can you please tell us something about ‘helping out’ our children without being strongly disadvantaged. For example, can one loan some money to a struggling adult child, even if it is a loan?
Thank you.
Marie, You can loan money to an adult child , but Centrelink will still consider that loan an asset of yours. You can also give limited gifts as described in Centrelink’s policies here.
I am 66 and single. I have approximately $160,000 in savings and $420,000 in super. It seems like a lot, but I am concerned about the future. When would I be eligible for the pension , if ever.
Thank you.
Hi Sarah, thank you for reaching out for further assistance. We will send you an email separate to this comment with details on how we can potentially help via a phone consultation.
I’m on a part pension as I receive a CSC defined benefit pension as well which is fully indexed. My wife and I both have money in separate superannuation accounts totaling about $110,000. We are not drawing down on these funds.
Would it be better to put our super into an annuity and how would that affect our Age pension?
John, we can’t give you personal advice on whether an annuity is right for you. There can be some Age Pension benefits for part pensioners in utilising an annuity. Where a person holds an annuity product that meets the legislative requirements then only 60% of the purchase price of the annuity is considered under the assets test until age 84 and then 30%. So, purchasing an annuity can reduce your assets for the assets test and potentially lead to a higher part pension. Challenger, one provider of annuities, explains it well here. You may wish to talk to a financial adviser about annuities.
I am 3years away from the pension but I think we have to much in assets to receive a pension can we talk to someone about it as we would like to leave some assets to our children and maybe get part pension
Hi Victor, thank you for your comment, we will send you an email separate to this comment with details regarding our phone consultations that you can respond to.
My husband and I will retire in three years at age 67. Combined we have $250,000 in super, and 50,000 in cash. We own a home worth $1,000,000. Is there a “sweet spot” that we should aim for so our lifestyle will be comfortable with both the age pension and income.
Hi Amanda, thank you for reaching out for assistance. We will send you an email separate to this comment with details on how we can potentially assist via a phone consultation.
We (aged 70 and 67) would be interested in some commentary around a couple who own both their home and a holiday home (neither is encumbered). The only income is from Superannuation investments.
Thanks,
Paul
Thanks for the feedback, Paul. We’re very likely to write more about using home equity for retirement income in the future.
Hi my name is les thomson l am 65 and hope to retire next year , I have $170000 in super and my wife is 60 works part time $400 per week and she has $84000 in super and our bank balance is $70000 , we have a house valued $900000 and we have no debts,any advice if this is possible, regards les
I too would appreciate a single person’s version of this article.
Hello, I am 69 years and self funded retiree – do a little casual work to help augment income and live relatively modestly. Thus I do not receive any government assistance at all. Am interested to know if I could perhaps be eligible for Commonwealth Seniors Health Card. Also interested in the application of this article’s asset points for singles, which youve responded to earler commentators to say you will do, so thanks.
Running $900,000 $900 k in super and $50 k not) under super, assuming a 8% return (10 years average as per most industry finds), and 2% off for inflation p.a. may even see that couple be able to retire at 60 and not have to rely on what may be a very much harder to get old age pension.
Gary, you might like to try our Retirement Income and Spending calculator. To use it you can go through our Age Pension Eligibility calculator and after finishing that you will see the Retirement Spending Guide in the left hand menu. The calculator helps think about sustainability of spending in different market conditions.
Hi
I have been living in Australia since Sep 2014 on a PR visa . I got citizenship in 2020 .
I am divorced and live in my daughters apartment and pay a subsidised rent .
Australia is my permanent residence . I did go on a few long holidays as I am not working . I never worked in Australia . I am 67 years old . I have lived for 5 consecutive years in Oz .
When will I be eligible for aged pension and when should I apply ?
I have no income and live on my savings now .
Hi Oenone, thank you for reaching out for further assistance. We will send you an email separate to this comment with details on how we can potentially help via a phone consultation.
Thanks for your email . Appreciated .
I was on a part pension until the coalition moved the goalposts. My wife and I lost $14,000 per year of age pension so I went back to part time work. Our allocated funds balances are higher now than when we commenced them 8 years ago because we have been drawing the minimum legislated amounts and we have funds with multiple asset classes. We have been drawing the minimum because I don’t trust politicians not to tamper with the rules. Mt scepticism proved correct when the coalition government moved the goalposts
Hi,
I am 60 years old single man who lives alone in my own villa which is worth 800K in Sydney.
Due to hearing difficulties I have with compounded knees pain, I wasn’t able to find any long-term employment for over the last two years.
So my question is if am I started to use TFR pension( intending to withdraw 4% yearly) from my Super which currently balances about 700K plus Jobseeker allowance I am receiving ($ 450per fortnight) , will that be feasible to live on another 20 to 25 years ?
I current cost of living is 50K a year and considering 2% inflation, I may need 75K in 10 years’ time so what kind of strategy should I put in place?
Hi Maung, thank you for reaching out for further assistance. We’re sorry to hear of your health issues and their impact on trying to secure long-term employment. To help understand how long your money may last we have a Retirement Spending Guide tool that you can utilise. I can see you have registered your account/password with us previously so if you CLICK HERE and login, you will see on the left hand side of your dashboard our Retirement Spending Guide that you can use to help with your planning.
I would take you up on your help except for the fact I’m flat stoney broke due to a crook of a former employer who didn’t pay any super to any of his drivers for 6 yrs and has gone bankrupt. ATO won’t even look at him as he’s protected by the bankruptcy act.
I have around $100k of super and owe around $215k on our 2×2 apartment. The family home is worth around $750K and paid for. The apartment earns around $400/week. I am 64 and my wife is 60. I’m finding it increasingly difficult to work a physical job and can’t wait to be eligible for the pension. Mt wife doesn’t work and is suffering with sight and hearing. What can I expect in 2 and a half year’s time?
Hi Don, thanks for reaching out for further assistance. I can see you have used our eligibility calculator earlier today but were told you are ineligible for any payment. To get an idea as to what you may receive once retired I recommend completing the eligibility calculator again but enter $0 as the amount of income you are earning to get a rough indication (obviously there may be changes between now and in 2.5 years’ time). To aid in this I have sent you an email separate to this comment for you to set up your account with us which means you can login and complete the eligibility calculator as many times as you like between now and when you are ready to apply.
Hi
My husband and I, 67 and 73 years of age, have approx. $420,000 in super. Thus we will be eligible for part Age Pension. Can we draw down more than 10% per year, say $50,000 for 7 to 8 years and then downsize our home worth quite a lot and put $600,000 back into Super to last the next 10 to 15 years of our lives. Question being does the amount I draw from our Super make a difference to the Pension figure per year?
Hi Teresa, thank you for reaching out for further clarity. As superannuation is considered an asset (not income) and is based on the total balance of the account, the amount you choose to draw down does not impact your pension in a negative way. In fact drawing more will reduce the total balance further therefore meaning you may be eligible for an increase in the amount of pension you receive as your super’s balance falls further and further over the years. If you would like to discuss the matter in more detail to understand your options and best prepare yourself we can have a confidential phone discussion with you. I will send you an email with further details separate to this comment.