How to pay yourself in retirement

Three ways to fund yourself

Many people assume retirement income comes down to being on a pension or not. But it’s not quite as clear cut as this.

The recent Treasury Intergenerational Report (IGR) shows that about 65% of retirees will be on full or part Age Pensions, and 35% self-funded. But those who start retirement living on their savings will often transition to at least a part pension at some stage.

Here is a brief overview of the three different forms of retirement funding:

Full Age Pension

This means that both your income and your assets fall below the current thresholds for singles or couples. Should either your income or assets be above this threshold you will be denied a full pension. The Age Pension is paid fortnightly. It also includes a basic supplement and an energy supplement. You will also qualify for a Pensioner Concession Card (PCC) which offers significant discounts on medical services, PBS medicines, utilities and other expenses such as rates. See the full Age Pension detail here and check if you might qualify.

Part Age Pension

This is applied if you are above either the income or assets threshold, but under the cut off points. A so-called ‘taper’ rate applies, reducing your income from full pension down to no pension, depending upon your income and assets. But as we have noted before (in the case of Tom) you can qualify for a few dollars in a part pension and still receive the benefits of supplements and the Pensioner Concession Card, which amounts to a few thousand dollars each year in benefits. Check your eligibility now if you are unclear about your entitlements.

Self-funded in retirement

This 35% of the Australian retiree population includes those who are just above the thresholds or well over. If you are in the former category, it is wise to keep checking as, if you spend money on renovations or travel, or gift it, you may then qualify. Either way it is always worth noting the income threshold for the Commonwealth Seniors Health Card (CSHC), as this is worth thousands of dollars in concessions, in a similar way to the Pension Concession Card. You can check your eligibility here and even get Retirement Essentials to help complete your application.

Typically income for those who are self-funded can include an income stream such as an account-based pension, lump sum super drawdowns, annuities, personal investments in shares or property, interest on cash, part time work and/or other more specific investments. Getting the mix of income right for your needs, whilst minimising tax, requires a high degree of financial literacy. If you would like to discuss your ‘mix’ of income, book a consultation with a licensed Retirement Essentials financial adviser.

Whatever the source of your retirement income funding, it is never a ‘set and forget’ scenario. Rules, rates and compliance change frequently, so using one of the many tools on the Retirement Essentials site allows you to better understand and control your financial destiny.