How will receiving an inheritance affect my pension?
I am retired, single, 66 and on a pension. I own my home, have $100,000 in the bank, and I am expecting another $200,000 from an inheritance. How will this affect my pension? Apart from my furniture, I have a cheap old car.
The cut-off point for a single home owner for the assets test is $280,000. If we put a value of $10,000 on your car and furniture, we can see that when the inheritance comes your assessable assets should be around $310,000. This is not far from the cut-off point. You will be asset tested because the deemed income on $300,000 of financial assets is $216 a fortnight.
Receiving an inheritance can significantly change your pension eligibility.Credit:Simon Letch
Centrelink will apply both tests and the one which gives you the least pension will be the one they use. If you go to the pension calculator on my website you will see that your pension would be $1013.50 a fortnight under the income test and $936.50 under the assets test. Therefore, your pension will drop by $90 a fortnight or $2,340 a year.
Yes, it is a slight reduction, but you will keep the concession card and have the benefit of $200,000 to spend as you wish. Of course, if you need to eat into your capital, your pension will increase as your assets reduce.
I am 62 and retired from full-time work in 2021 at age 60. Last year I worked for four weeks in a temporary role at another company. To convert my superannuation to an account-based pension I must declare that I have retired. Would this mean that I cannot ever be employed again, such as in a short-term temporary role, or does this retirement only relate to full-time work?
As you ceased work on or after age 60 (last year), you automatically met the retirement condition of release at that point. If you have not worked since you can convert your superannuation to an account-based pension.
My partner and I are in a quandary. We are in our 70s, own our homes worth $500,000 and $750,000 respectively, and both receive a single’s pension. We are both retired. I have $140,000 in super and my partner has none. We have very little in other assets and cash reserves. We would like to be married. What advice could you give us to be in the best possible financial situation?
The problem is that you will become a couple – and the $500,000 property and $140,000 in super will be assessed for the assets test. This means you may get only $382 a fortnight each in the age pension. The big question is how you will live on that.
You would certainly need to make the more expensive home your residence because that’s exempt, but even if you sell the cheaper home, the money will still count as an asset. The two viable options are to stay in your present relationship, or get married, sell a property and be prepared to live on the capital.
We are aged 70 and 66 respectively and still owe $400,000 on our home – we hope to pay this off in four years when we retire. Currently, we are maximising salary sacrifice, while withdrawing pension from our super to pay the loan, and aggressively using all our spare money to reduce that loan. We wonder if we would be better off simply withdrawing $400,000 from super and then focusing all our energies in the next three to four years on building up our super. We are conscious of the bad returns superannuation has given recently.
In theory, one would hope your superannuation in the upcoming years would give better returns than the interest you would be paying on your housing loan. But given the shortness of the timeframe, and the fact that interest rates may well hit 6 per cent or more on your housing loan, I think it would be better to withdraw that money and pay off the loan. That gives you certainty, and by putting money into superannuation every month you get to practise dollar cost averaging, which is a proven wealth-making strategy when the market is down.
- Advice given in this article is general in nature and is not intended to influence readers’ decisions about investing or financial products. Investors should always seek their own professional advice that takes into account their own personal circumstances before making any financial decisions.
Noel Whittaker is the author of Retirement Made Simple and numerous other books on personal finance. Email: [email protected]
Most Viewed in Money
From our partners
Source: Read Full Article