Five common retirement money myths
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Kaye Fallick is a best-selling author and the founder of YourLifeChoices website. She is a passionate advocate for those over 60. Learn more about her work on her website: Staying Connected.
It’s all too easy to feel powerless when you enter retirement and resign yourself to what you believe will be a lifetime of fixed income. But that type of thinking can really set you back. Retirement is not a destination. It’s just a term we use for life post-work. And it now often covers two, three or four decades of life during which your goals, priorities and opportunities will continue to change. So it’s really unhelpful when media stereotypes of a ‘fixed’ retirement convince you that your financial situation is set in concrete. It’s not. Here are five very common myths about retirement that need busting in order to free up your thinking about the options and possibilities at your disposal.
Myth #1 – You are at risk of running out of money
This idea is firmly entrenched in the minds of many retirees. Recent Challenger research reveals that about 40% of older Australians are still worried that this will happen. But technically speaking, it can’t. And that’s because we have a safety net in the form of the Age Pension which currently pays $29,874 per annum, including supplements (the couples combined amount is $45,037) to all eligible citizens aged 67 and over (subject to means testing). While this amount may not be as high as pre-retirement income, it is also indexed twice a year and extra work income can be earned within the Work Bonus allowance (about $11,000) per annum. If you earn more than the full Age Pension allowance, you don’t automatically lose your entitlement, but will move to a part-Age Pension instead. Running out of money sounds very dramatic – most people spend more in their early retirement years, but less in their later years. Along the way, most individuals monitor their spending and adjust to ensure that they continue to live within their means.
Myth #2 – You need $1 million for a comfortable retirement lifestyle
This is the most damaging myth of all. And one of the most persistent as there are many older Australians who still believe this to be the case. It came about from previous suggested ‘Retirement Standard’ spending levels tagged to a comfortable retirement, which would have required this amount in your super and savings. But that’s just not realistic. The real numbers, for most Australians, are revealed in the Australian Tax Office median super balances by age. And guess what? The median saved for those aged 65-69 is $247,954 for men and $199,006 for women. These amounts, if additional personal savings levels are also modest, will automatically qualify the individual for an Age Pension – and allow for a retirement income ‘top up’ over the next 20 or so years. It’s nice if you have five times the median amount in balances (i.e. for the highest number of people aged 65-69). But it’s not common! Most Australians report higher levels of contentment in their retirement years, so they clearly do not ‘need’ that mythical million dollars!
Myth #3 – You’ll never qualify for the Age Pension
Age Pension entitlement should not be such a big surprise – but this is the case for many people when they realise they qualify. That’s the good news part of the story. But the not-so-good news is that some people just assume they have ‘too much’ and never apply – or apply long after they are eligible – and end up missing out on tens of thousands of dollars. The asset limits for part-Age Pensions are quite lenient. For instance, for a single homeowner the assets limit is $704,500 and for a couple it’s $1,059,000. Statistics show that 80% of Australians by their 80th decade will receive Age Pension entitlements. So don’t assume you won’t. You can use this free calculator to check eligibility now.
Myth #4 – if you are a self-funded retiree, you’ll get no government support
Again, this is just incorrect. For more than 40 years the Commonwealth Seniors Health Card has been available to those who don’t qualify for the Age Pension. Apart from age (67) and residency requirements, there is an income test. The assets test does not apply. And in recent years the income test has been increased significantly, to the point singles can now earn up to $99,025 and couples can jointly earn $198,050 and still qualify for this helpful concession card. Depending upon which state or territory you call home, benefits include hefty discounts on pharmaceuticals, medical imaging, transport and some energy costs. More information is available here.
Myth #5 - Your income is unlikely to increase in retirement
Again, this just doesn’t hold up. As noted above, once you leave full-time work, there is always the opportunity for more work. Many older Australians find that they are valued by companies looking for experienced, part-time, skilled staff. And that creates an income ‘sweet spot’ when you combine super drawdowns with, perhaps, part-Age Pension payments and some work income. But there are a myriad of ways of increasing your retirement income. One is to use the downsizer contribution if you move to a smaller home – this allows a couple to top up super by $300,000 each! There are further strategies to maximise contributions, too numerous to outline here, but it’s definitely worth discussing your goals and options with your super fund and/or a financial adviser.
In short, it’s true that most of us don’t know what we don’t know! This is very evident when it comes to retirement income. Understanding the rules that apply to your age and stage is imperative if you are to make the most of what you have. And dumping misleading myths is the first step in this process!
About the Author: Kaye Fallick is a writer and best selling author. She is also the founder and former publisher of the YourLifeChoices website which she believes gave her a 20-year ‘apprenticeship’ in learning the health, money and lifestage dramas and concerns of Australian baby boomers. She’s an advocate for Australians over the age of 60 and we are delighted to have her on board, writing content for you. If you’d like to know more about Kaye, you can visit her website, Staying Connected.
The views expressed in this publication are those of the author.
It’s time to crush these retirement money myths. Image source: Pexel.
It’s all too easy to feel powerless when you enter retirement and resign yourself to what you believe will be a lifetime of fixed income. But that type of thinking can really set you back. Retirement is not a destination. It’s just a term we use for life post-work. And it now often covers two, three or four decades of life during which your goals, priorities and opportunities will continue to change. So it’s really unhelpful when media stereotypes of a ‘fixed’ retirement convince you that your financial situation is set in concrete. It’s not. Here are five very common myths about retirement that need busting in order to free up your thinking about the options and possibilities at your disposal.
Myth #1 – You are at risk of running out of money
This idea is firmly entrenched in the minds of many retirees. Recent Challenger research reveals that about 40% of older Australians are still worried that this will happen. But technically speaking, it can’t. And that’s because we have a safety net in the form of the Age Pension which currently pays $29,874 per annum, including supplements (the couples combined amount is $45,037) to all eligible citizens aged 67 and over (subject to means testing). While this amount may not be as high as pre-retirement income, it is also indexed twice a year and extra work income can be earned within the Work Bonus allowance (about $11,000) per annum. If you earn more than the full Age Pension allowance, you don’t automatically lose your entitlement, but will move to a part-Age Pension instead. Running out of money sounds very dramatic – most people spend more in their early retirement years, but less in their later years. Along the way, most individuals monitor their spending and adjust to ensure that they continue to live within their means.
Myth #2 – You need $1 million for a comfortable retirement lifestyle
This is the most damaging myth of all. And one of the most persistent as there are many older Australians who still believe this to be the case. It came about from previous suggested ‘Retirement Standard’ spending levels tagged to a comfortable retirement, which would have required this amount in your super and savings. But that’s just not realistic. The real numbers, for most Australians, are revealed in the Australian Tax Office median super balances by age. And guess what? The median saved for those aged 65-69 is $247,954 for men and $199,006 for women. These amounts, if additional personal savings levels are also modest, will automatically qualify the individual for an Age Pension – and allow for a retirement income ‘top up’ over the next 20 or so years. It’s nice if you have five times the median amount in balances (i.e. for the highest number of people aged 65-69). But it’s not common! Most Australians report higher levels of contentment in their retirement years, so they clearly do not ‘need’ that mythical million dollars!
Myth #3 – You’ll never qualify for the Age Pension
Age Pension entitlement should not be such a big surprise – but this is the case for many people when they realise they qualify. That’s the good news part of the story. But the not-so-good news is that some people just assume they have ‘too much’ and never apply – or apply long after they are eligible – and end up missing out on tens of thousands of dollars. The asset limits for part-Age Pensions are quite lenient. For instance, for a single homeowner the assets limit is $704,500 and for a couple it’s $1,059,000. Statistics show that 80% of Australians by their 80th decade will receive Age Pension entitlements. So don’t assume you won’t. You can use this free calculator to check eligibility now.
Myth #4 – if you are a self-funded retiree, you’ll get no government support
Again, this is just incorrect. For more than 40 years the Commonwealth Seniors Health Card has been available to those who don’t qualify for the Age Pension. Apart from age (67) and residency requirements, there is an income test. The assets test does not apply. And in recent years the income test has been increased significantly, to the point singles can now earn up to $99,025 and couples can jointly earn $198,050 and still qualify for this helpful concession card. Depending upon which state or territory you call home, benefits include hefty discounts on pharmaceuticals, medical imaging, transport and some energy costs. More information is available here.
Myth #5 - Your income is unlikely to increase in retirement
Again, this just doesn’t hold up. As noted above, once you leave full-time work, there is always the opportunity for more work. Many older Australians find that they are valued by companies looking for experienced, part-time, skilled staff. And that creates an income ‘sweet spot’ when you combine super drawdowns with, perhaps, part-Age Pension payments and some work income. But there are a myriad of ways of increasing your retirement income. One is to use the downsizer contribution if you move to a smaller home – this allows a couple to top up super by $300,000 each! There are further strategies to maximise contributions, too numerous to outline here, but it’s definitely worth discussing your goals and options with your super fund and/or a financial adviser.
In short, it’s true that most of us don’t know what we don’t know! This is very evident when it comes to retirement income. Understanding the rules that apply to your age and stage is imperative if you are to make the most of what you have. And dumping misleading myths is the first step in this process!
About the Author: Kaye Fallick is a writer and best selling author. She is also the founder and former publisher of the YourLifeChoices website which she believes gave her a 20-year ‘apprenticeship’ in learning the health, money and lifestage dramas and concerns of Australian baby boomers. She’s an advocate for Australians over the age of 60 and we are delighted to have her on board, writing content for you. If you’d like to know more about Kaye, you can visit her website, Staying Connected.
The views expressed in this publication are those of the author.
