A new year is always a great time for some soul-searching and preparing for the upcoming year.
This is the time when we make lots of promises to ourselves only to break them few days after
but when it comes to retirement this is something every retiree should prepare for
and review very seriously on annual basis. So to start the new year on a positive note,
let's go over the checklist I have created for you to ensure this year will be a very successful one indeed.
My name is Katherine Isbrandt from About Retirement, I am Certified Financial Planner
and you are watching About Retirement TV, the place to get all the information you need
if you wish to be well prepared for your retirement or if you want to improve it
from assets, income, lifestyle, government benefits, if you have already retired.
Brian Tracy said that, "The checklist is one of the most high-powered productivity tools ever discovered."
1. Apply for Age Pension and HealthCare Card
If you are turning 66.5 this year, apply for Age Pension.
You can submit the application 13 weeks before you hit the magic number.
You should really start preparation setting up your assets and maximizing your future entitlement long before that date,
but if you haven't, you still have time.
It is so much easier to have your money properly set up before you apply than trying to fix any mistakes after.
Not that this is impossible, but why not try to get the highest entitlement from day one.
2. Concession card.
Once you receive your Age Pension entitlement you will be automatically issued with a concession card - Healthcare Card.
Remember then immediately to apply for those discounts: gas rebate, electricity rebate, water rebate,
council rate discount, driver's license and your concession for registration of your car.
For the list of other benefits available to you from your concession card watch my video
"Pensioner Concessions Card – the best!"
3. If not eligible for Age Pension, apply for Commonwealth Seniors Health Card.
Strangely enough, many retirees who are not eligible for Age Pension hence not receiving the HealthCare Card
somehow often don't apply for the Commonwealth Seniors Health Card.
This little gem will still provide you with a great deal of discounted benefits
which I explained in my video: Centrelink Concession Cards for your Retirement.
During the covid pandemic, it shows that the card is actually more than just discount for medical and pharmacy costs.
We have seen income support for retirees, as well as ability to claim up to 10 rapid antigen tests
available not only to pensioners with HealthCare card
but to holders of the Commonwealth Seniors Health Card, as well as DVA cards.
4. Get MyGov organised
MyGov website has been developed with the view, that today you don't go to Centrelink office and
you don't bother Centrelink offices any longer. All information exchange is happening via online system of MyGov.
Sometimes it works, well sometimes it doesn't, but that's the new system that we have.
So what can you do on MyGov? Well you can update your income and your assets for Centrelink.
You can check your Medicare claims, you can collect all your health data through My Health Record,
or you can even jump to My Tax to complete your tax return, which I would only recommend
if your tax affairs are really very simple, otherwise please consult an accountant to do it properly.
5. Check all your entitlements,
not just federal, but also provided by your state government.
I have already created another video: "Concession Cards benefits per state"
so please watch if this is the information you need, but please remember that for some of those benefits
you need to reapply every year to actually receive that benefit in the upcoming year
6. Revalue your assets.
Very rarely I see pensioners updating values of for example their cars, or their boats.
If you bought a car 2 or 3 years ago for, for example $20,000,
it is very likely that its value today might be closer to $10,000,
If this is the case, that reduction in car value will increase your Age Pension by $780pa.
So update value of your belongings through MyGov
or request your financial planner to do this on your behalf, if he or she acts as your nominee.
This is what I do every year during our annual reviews with every client.
Also Centrelink updates your market-linked investments such as for example shares or managed funds
on 20th March and 20th September of every year, so you don't have to worry about updating Centrelink
every time your investment portfolio goes up in value as it happens automatically.
However my recommendation is that if your portfolio drops in value, well, immediately notify Centrelink
and do not wait for the automated review. Your Age Pension will be recalculated again based on the information provided
At the end of the day, this is your income and money in your pocket.
7. Review your plans for the upcoming year.
Beginning of the year is a great time to sit down with your calendar and decide what your plans are for the upcoming year
Are you planning on any major expenses, such as home upgrades, buying a new car, overseas holiday,
or selling family home to downsize. If this is the case you need to be well prepared,
adjust your investment planning accordingly as well as most likely review your income needs for that year
Check the impact those plans will have on your total investment value and decide how many years less
you will be provided with income due to that spending.
If this is impacting longevity of your savings and your income rethink your spendings but if you can afford it well go for it.
Also check if this planned activity cuts your future income dramatically.
If this is the case question necessity and importance of this plan.
As I always say once money is gone it is gone forever including loss of any future growth and income,
those savings could make in the future
so make sure you know in advance the impact of such big spending
8. Adjust your investing to your plan
If based on your review, you believe this is either an urgent or necessary spending or just simply you can afford it,
then adjust your investments accordingly to ensure that your investments are prepared in advance
for whatever expenses you need to meet or whatever withdrawals you need to make.
Don't do it in a very last minute because if the market is not favorable at the time you need to access your funds,
selling investments in a downturn market may result in sizeable capital losses.
9. Additional income. I often get asked can I have a higher income from my savings
or from my investments or from part-time work? The truth of the matter is that most retirees are Assets Tested,
meaning your eligibility for Age Pension is declined or reduced under Assets Test and not Income Test.
So for example, if you as a couple, have $800,000 in assets,
Therefore you are receiving $136.80 in Age Pension,
you can easily earn an annual income of up to $68,000, providing that includes all your income,
together with deemed income and your work income. Your Age Pension is still reduced due to Assets Tests
so your income up to that level has no negative impact on Age Pension eligibility.
10. Pension funds.
Unless you really struggle financially keep your pension payments from your superannuation to the minimum.
This will help with longevity of your funds meaning
you will be provided with income for longer, hopefully for your life expectancy.
11. Mortgage assets.
Unfortunately, often people buy property investments without asking for the advice before the purchase happens.
A common situation I see is buying an investment property with a family home being security for that purchase
Let's check this scenario, George and Mia bought an investment property for $400,000
with their own home being security for the loan, of the full purchase price of $400,000.
They also have $200,000 each in super funds.
After 5 years they want to apply for Age Pension. At that time their investment property is valued at $500,000
and their supers have gone up to $250,000 each. The loan amounts to $350,000.
Centrelink will calculate the total of their super funds as $500,000 plus another $500,000
of value of the property, which means the total assets now amount to $1M
Which is above the Assets Test limit, therefore to their horror, they find out that they're not eligible for Age Pension.
If the loan is against the investment property then Centrelink calculates
the net value of the property after deducting the loan amount outstanding which in our example is $150,000.
If we then add $150,000 and $500,000 values of superannuation funds
in this scenario, they are actually eligible for Age Pension of a combined income of $18,814.
So before you jump into buying any investment property, you really need to get advice, not only how to structure your loans,
your savings, your assets for tax benefits, but also for your retirement in the future.
This is all about long-term planning that's where the real benefit is.
12. Shortage of income
If you are struggling with your daily expenses and you own your family home, you have few choices.
For example - downsizing,
but please get advice to ensure that your Age Pension does not reduce.
2. Utilizing a reverse mortgage.
This could work as a solution for some, but not for others, so please get advice.
3. Keeping your mortgage open, this is a strategy some people use,
just to keep the home loan facility open in case you are short of funds.
There is some logic behind this
as this is an easy way to quickly get some extra funds and withdraw from your home equity.
It is pretty unlikely that the same bank would provide you with the same loan once you retired.
So by not closing down the loan facility you don't have to make any loan applications
but rather just withdraw whatever is available.
But easy is not always the best option so please get advice before you start withdrawing any of your money
and 4. Home Equity Access Scheme
This will provide you with an ongoing top-up of your income.
Interest rates are pretty low similar to the open market lending of 3.95% and you are not required to make any repayments.
The scheme is also available to self-funded retirees, although, well I cannot think of the reason
why a self-funded retiree would apply for this scheme.
Other strategies might assist to have access to funds
but hopefully also maybe access to Age Pension, which I think is worth exploring.
The smartest thing to do here is to get advice in terms of comparison between all those four options.
So you can decide based on facts and the actual financial outcomes
of each of those scenarios before committing to any of those costly transactions
13. Family trusts.
Family trusts can create a real nightmare when applying to Centrelink for Age Pension
These days ATO and Centrelink share their data so it is more likely than not
Centrelink will know about your involvement in Family Trust.
You may not be receiving any income from the trust,
but if your role is for example appointor or a trustee you might be very surprised to learn
that those trust assets might be included in your Assets Test for Age Pension benefit
and your Age Pension could be reduced or cancelled altogether under Assets Test.
Parents often set up such trust for their troubled or disabled child.
The idea is great but might be detrimental to your retirement plans.
This is a very complex area and the best result is always to receive an advice
before you start setting up those complex structures.
A good advice may pay you big dividends.
I hope you found my checklist of help. I realise that at some points may not necessarily apply to you
but others could be a very good reminder, what to do or what not to do.
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if you would like to get more information, check out my website AboutRetirement.com.au that is fully dedicated to
the topic of retirement and how to utilize every single benefit available to you before or during your retirement.
When you are visiting my website please don't forget to sign up to my newsletter
to be always up to date with all the financial changes that can impact your retirement plan.
And now I invite you to watch those mentioned videos
about Concession Cards and benefits you get from them.
The second recommendation is the list of videos
how to be best prepared for retirement,
best super or tax strategies to apply for your financial benefit.
I will see you in my next video, bye.