Get a grip on the pension rules

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Old woman carries heavy load on modern street
To allow yourself the choice of retiring when it suits you it is important to start planning now

Westender readers are well aware of the changes to the pension brought in during the last budget. Since the mid 1980’s governments have been alarmed by our slowing population growth, the increasing number of people seeking a pension (Baby Boomer bulge), and a dwindling tax base to pay for it all.

No solution is easy or ideal and most solutions hurt somebody. This latest round of measures in our most recent budget is no different. This Liberal government still faces the same issues as the Labor government did 30 years ago, except it’s now worse. The facts are, it’s not so much a political or ideological decision, but a cold, hard, economic and demographic reality.

So if you are planning on retiring within the next 10 years or you’ve retired recently, it is important that you understand what the rules are, how you can adjust your circumstances to best create a comfortable retirement, and how to keep things flexible enough for likely changes in the future.

So what are the changes?

If you were born after 1952, the new rules mean that

  • you won’t have access to the age pension until after 65 (for many, not until age 70).
  • access to government benefits such as healthcare will be means tested.

If you became an Australian resident after 2001, then your access to pensions and benefits will also be reduced.

Overall, the government will reduce both the amount paid out and the number of Australians eligible for the aged pension.

How will this affect me?

If you have not yet retired, you’ll have to wait longer before you can receive the age pension. This means you may have to work longer, or work longer part time. That may allow you to build a bigger savings nest egg.

If you have retired, you may also have to consider things such as

  • home downsizing,
  • reconsidering how your investments and super are being managed, and
  • sadly for many, an adjustment to your everyday lifestyle.

This last point could affect your long term plans, like budgeting for a “once in a lifetime” overseas holiday. The spending of a lump sum early in retirement could have potentially devastating consequences later on.

The bottom line is that over time, we should all expect to receive less and less assistance from the government in our retirement. Thus, carefully managing our own finances now is crucial.

What can I do?

The best thing you can do right now is to seek expert advice. The major areas you will need your adviser to examine include reviewing how your investments have performed, where and how your money is invested (and why), your spending habits, how much income you require in retirement, if you have any large purchases/expenses coming up, and your current living arrangements.

A good adviser can then guide you through a series of decisions and solutions that both maximises your government entitlements and stretches your dollar further for a more secure, worry free, and above all, happy life!

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