Can Age Pensioners ever save?
This is a topic that comes up a lot. Because the primary source of income for nearly 70% of retirees is a full or part Age Pension, the ‘liveability’ of the pension is of critical importance.
But one Age Pensioner may bear little resemblance to another.
With nearly 2.6 million Australians aged 65 and over receiving a pension, there is a wide spread of economic circumstances.
Despite this, retirees across the board are often told about the importance of having ‘rainy day’ money. The ideal amount, according to some financial experts, is the equivalent of at least three months’ income. Let’s say you are a couple and your earnings are split between a part Age Pension and a retirement income stream, totalling about $60,000 per annum. This represents a fairly ‘typical’ retiree couples’ income. But at $5000 per month, this means that you will need $15,000 to satisfy the above ‘rainy day’ target.
If we apply this same principle to a single retiree on a full Age Pension, they would need to have $7128 in rainy day funds, based upon entitlements of $1097 per fortnight or $28,514 per year.
This sounds a lot to stash away when you’re on just $28,514 per annum, doesn’t it? Which set us to thinking about whether people on a full Age Pension can save at all.
This article doesn’t promise solutions; it’s offered as a thought starter and a chance to raise ideas. Retirement is as individual as you are and so the assumption that someone can save as much as someone else is unrealistic. One person may be facing multi medical challenges or helping out other family members. Another may be living rent-free and much more able to save.
What is possible?
Let’s instead look at some ways those on an Age Pension can and do save. We’re concentrating our attention on singles on a full Age Pension as they represent the group with the strictest income limits. We’re also inviting you to add to these thoughts and help other members of the Retirement Essentials’ community to make more of less!
Could Sam save more?
Situation: Single homeowner on the full Age Pension
Total income, including supplements, $28,514 per annum
Benefits: automatic Pension Concession Card, conservatively worth about $3000 per annum
Other savings, including medical and pharmaceutical due to above concessions, state government assistance (normally through a seniors card), including discounts on transport, energy concessions and rates.
Entertainment costs can also be reduced using seniors’ clubs or discount cards, or choosing activities (meals, concerts and films) on designated seniors’ days.
Work – Sam can benefit from the increased Work Bonus income credit of $11,800 to add to his savings, assuming he can find suitable work
Comparing costs – using comparison sites and Apps for fuel, grocery shopping, utilities, credit cards, bank account interest, and insurances mean Sam can trim his outgoings as much as possible.
How can Sue save as a renter?
Situation: Single, renting on full Age Pension
Total income, including supplements, $28,514 per annum
This is a tougher challenge, as it is likely that Sue will be spending up to 40% of her income to cover housing costs. She will qualify for Commonwealth Rent Assistance (the maximum amount is currently $184.80 per fortnight), but this still leaves a big hole in her weekly earnings.
As with Sam, Sue can also access the Pension Concession Card, seniors’ discounts and use the same opportunities including the Work Bonus, cost comparisons etc.
She might also review her situation and see if there is any opportunity for house sharing or for occasional house sitting opportunities. There are no easy answers here, the situation for singles is tough. It is even tougher for females, with single Australian women over 60 as those most likely to live in poverty (less than $30,000 per annum).
Thinking about wants versus needs
This is where the discussion gets tricky. Two of the Retirement Essentials’ team have single mothers on the Age Pension, both of whom save. One is a homeowner, the other lives in an Age Care residence. In their early 90s, they are of the so-called ‘frugal generation’. There’s a reason for this – both of them record every outgoing in an old fashioned notebook. They can tell you exactly what they spend, when and on what. Don’t laugh – it works for them. They are also very clear about the difference between what they need and what they might want, but don’t buy. This doesn’t work in every situation but neither of them have ever maxxed out a credit card and had to face the consequences. They simply know what they can afford up front.
What can all retirees do to save more?
Here’s a useful four-point checklist to help you review your own actions and expenditure to see if you could achieve more ‘rainy day’ funds:
- Check your entitlements – again and again. As your situation changes so can your earnings and assets. Make sure that you are not missing out on any benefits or higher payments you may be owed
- Consider a switch from credit cards to debit cards. Not only can you not spend more than you have, but you will also probably reduce the percentage fees that credit cards seem to automatically attract. For this reason paying bills by Electronic Funds Transfer (EFT) is also often cost effective.
- Can you do some project or ‘gig’ work? Such jobs might be child minding, gardening, electoral work, bookkeeping, mentoring – the list is endless. You’ll need to know how much you can earn if on an Age Pension, but you can earn a lot more now without threatening your entitlements
- Self-funded retirees can apply for a Commonwealth Seniors Health Card to ensure they, too, receive the available medical, transport and energy discounts.
Knowing your entitlements is the first step to maximising them. Retirement Essentials offers two easy ways you can keep on top of these tasks.
Firstly, you can check your status using the free Age Pension Entitlements Calculator at any time.
And if you think you may need some further guidance to make sure you are receiving everything you could get, the Maximising Your Entitlements consultation can help you quickly review your situation.
What’s your ‘secret sauce’?
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Do you agree with the ‘3-month’ rule of thumb for savings?
Is it achievable?
How do you manage to save?
When on a fixed income, whether that be a pension or self funded retirement, It’s always best to pay all bills either monthly or fortnightly. This means paying car registration monthly, insurance monthly, rates fortnightly, health insurance fortnightly etc. This allows us to level our expenditure more in line with a fixed income.
When our expenditure is up and down, we are more likely to charge those unusual expenses to a credit card or similar and when we have surplus months the temptation is to buy that little item we would like to have but don’t really need. The more even expenditure pattern we can achieve, the more we are likely to save that surplus.
In response to Gordon Green, I don’t agree with paying bills monthly or fortnightly. When you know a bill is due just make sure you have the funds to pay it. Usually paying annually saves eg car registrations. I don’t believe in paying any more than I need to therefore I keep a daily budget and expense book detailing everything regarding incoming and outgoing expenses, I know exactly which and when bills are due. To me its a weekly game of seeing how much better I can be at saving every week. But I make sure that when any bill is due I already know beforehand and tighten the money belt accordingly. I have always been like that and have never ever owned a credit card.
Dont live in Victoria if you need discounts this does not apply for CHSC or Seniors card.
Self-funded retirees can apply for a Commonwealth Seniors Health Card to ensure they, too, receive the available medical, transport and energy discounts.
Leave Australia
See you later and don’t come back!
Many years ago I setup a separate account that is for bills only and I put a set amount into that account each week Now I don’t have to worry about my bills as I know the money is there.
I review this each year to make sure I stay in front
Yes John, Australian is definitely not the lucky country that it once was and senior citizens seem to be a burden once their working capacity is doomed, hence not paying anymore taxes. It is rude and cruel of Australian Governments, no matter who is elected that they treat seniors with such sour rules which puts us/them on the poverty line especially when they wasted money on such things as gaming arenas, wasting money on knock down and rebuilds, overemploy themselves for jobs that can be shared by fewer rather than creating positions and increasing tax payer wagers. Our government no matter who on the day all strive to get rich themselves as well as wasting money on other countries with handouts when here they should be looking after the seniors who have contributed all their working lives. Growing old is tricky enough as it is with hidden or sudden health issues which arrive with age. We don’t need money worries on top of that to drag our health down even more.
Rose I totally agree
As far as outgoings go: I wonder how many people at the supermarket actually make use of the information in front of their eyes? DO NOT look at the price of an item, but instead look at the price per kg or other unit of measurement. THEN compare with the alternatives. For example, at the supermarket you could likely find 5 different offerings for sultanas all at different prices per kg or per 100 gm. Then choose based on 1/ quality you are happy with and 2/ cheapest price per kg. Obviously if you use a large quantity frequently there may be discounts on buying in bulk, and other such considerations. But think LONG TERM – how much are you going to use over the next year anyway, and buy based on price per unit. It IS printed on every item at the supermarket. But I have NEVER seen anyone looking closely at THAT price. And the range of prices per kg can be over 50% more for the dearest option. The other thing is: if something is a semi-discretionary item that regularly comes on sale, WAIT until the sale and buy at a discount. This is in the Wants vs Needs column as mentioned in the article. And on the subject of electricity, get used to a bit more warmth in summer, and run the cooler at 25C or 26C, not 21. 21C – or less – is for winter heating. Don’t use more than you need and then complain you can’t afford it – like some people on the current affairs shows who complain about the cost of electricity where you see the aircon set at 21 in the background.
all i want to do is let clink know i am fully retired and will no longer be receiving any income
not one online option covers this.ringing you are told to ring back
Hi
It’s a bit misleading indicating that the work bonus it $11800 every year. It seems it’s a once off initial increase then resumes at $7800.
I checked this with centre link and the spokesperson agreed it is misleading information.. everywhere you read work bonus is $11800. Have others found the same?