Superannuation expert Pascale Helyar-Moray warned Aussies over thinking they can just rely on the Age Pension in retirement if their nest egg dries up. (Source: Instagram/Getty)
Australians are being urged to ensure they’re doing everything they can to boost their superannuation to avoid a difficult retirement. Finder research recently discovered roughly 4.3 million Aussies fear they won’t have enough in their nest eggs to comfortably enjoy their twilight years.
A poll of more than 1,2000 Yahoo Finance readers found 65 per cent would try to get the Age Pension if they weren’t able to make ends meet. But Pascale Helyar-Moray, Finder’s superannuation literacy expert, told Yahoo Finance going down this route was not a sure thing.
“People just assume the Age Pension is there and there aren’t any criteria or qualifiers around it,” she said. “But they could not be further from the truth.”
According to government figures, around 2.6 million people are on the Age Pension.
Before they were approved for the payment, they had to undergo income and assets tests to ensure they were eligible.
If you’re single and receive up to $218 per fortnight in income, your pension rate won’t be affected.
However, if you’re over that threshold, the rate will decline by 50 cents for each dollar above $218.
If you’re in a couple, that income threshold is $380 per fortnight, and anything above that reduces your rate by 25 cents for each dollar over.
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The cut-off point for income is $2,516 per fortnight for singles, and $3,844 for couples living together.
Meanwhile, the assets that would be examined by Services Australia include:
Financial investments
Home contents, personal effects and vehicles
Real estate, annuities, income streams and superannuation pensions
Sole traders, partnerships, private trusts and private companies
To be eligible for a full pension, you can not have assets worth more that a certain amount.
This differs depending on whether you’re single, in a couple, or if you’re a home owner.
A single homeowner is allowed upwards of $321,500 in assets, while a non-homeowner can have up to $579,500.
A couple who owns their home aren’t allowed to have more than $481,500 combined, but that shoots up to $739,500 for non-homeowners.
The part pension allows a single homeowner to have up to $704,500 in assets, and $962,500 as a non-homeowner. A couple can have $1.059 million combined as homeowners, and $1.317 million as non-homeowners.
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A person’s primary place of residence, as well as up to the first two hectares of land it’s on, aren’t included in the asset test.
Helyar-Moray told Yahoo Finance these thresholds can catch a lot of people out as they might be cash-poor but asset-rich.
That could drastically affect how much they could receive, and, as a result, have in retirement to live off.
The superannuation expert said while many sign up for the Age Pension if they didn’t have enough superannuation, it’s not as if it’s a ticket to financial freedom.
“Unless you’ve looked at the the how much the pension is, it’s a bit of a shock,” she told Yahoo Finance.
The maximum rate, including the supplement and energy rebate, for a single person is $1,149 per fortnight before tax and $866.10 per person in a couple.
It’s also worth pointing out that the Age Pension is a taxable payment.
Centrelink doesn’t automatically deduct tax from the payment when it lands in your account, however you can set that up to avoid facing a debt at tax time.
Millions of Aussies are on the Age Pension, however a superannuation expert warned you wouldn’t want to rely on it fully in retirement. (Source: Getty) · Quinn Rooney via Getty Images
Helyar-Moray said $574.50 isn’t much to live off per week if you ran out of superannuation.
If your home was paid off, you’d have a bit more breathing room.
However, the number of Aussies entering retirement with mortgages still to pay off has more than tripled over the last two decades.
There are also more than 200,000 retirees renting. The Grattan Institute found 67,000 of those renters live in poverty.
The median rent across Australia was recently $644 per week, according to Canstar, with that number rising to $675 per week if you only focused on capital cities.
“Even if you lived in one of the least-affluent parts of Australia, you’d be having to watch your money very carefully to make sure that it lasted,” Helyar-Moray said.
“Without people doing the research and planning ahead and knowing that’s the quantum that they’d have to play with, I think to be relying on the government to support them in their retirement is not a sound strategy.”
The superannuation expert said your nest egg should never be viewed as a set-and-forget type of asset.
She encouraged Aussies to regularly know how much they have saved up, what they’re invested in, and whether they could be in a better fund.
“Put very simply, performance should be high, high and fees should be low. That’s really what it comes down to,” Helyar-Moray said.
She added that salary sacrificing or personal super contributions can be a fantastic way of boosting your nest egg while you’re still working.
Your employer has to now put 12 per cent of your pay into your super, however, you can also put in additional contributions. which can add up if you start early.
If you had $60,000 in your super right now and contributed just $10 per week to your account, you would have boosted your nest egg by $319,091 over 20 years, based on a 9 per cent rate of return and monthly compounding.
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