It’s important to know how much savings you have when retiring. Do you need to Budget? Can You Live on The Age Pension?
As of August 2022, the full rate of the age pension for a single person, including all supplements, is $25,677.60 a year.
Single people (with no dependent children) who rent in retirement are also eligible to receive up to the maximum rental assistance allowance of $3,790.80 a year (not sure if that’s enough to cover your rent though…)
You are also allowed to work a bit and earn up to $300 a fortnight to supplement your pension without it affecting your payment rate. That is a potential $7,800 extra income a year.
An asset test will also need to be assessed.
How to do an asset test
For example, if you hold more than about $250,000 in assets outside your family home as a single person, you may start to have your pension payments reduced.
Most Australian workers will naturally accumulate some superannuation over their working lives. Of course due to the forced nature of compulsory super, so it’s likely you will have something to supplement your income in retirement.
In retirement, many may anticipate no longer having to pay off big fees. Such as a mortgage or private school fees or childcare fees or spending on toys, gaming or pocket money or union fees. The the list can go on.
In total, that’s a lot on money one can expect to save from various expenses.
Another thing you may need to do is to cut back on some other large expenses in retirement. Things such as gym fees or work travel expenses.
Your biggest remaining expenses would include food, utilities such as electricity, gas, internet, water rates, motor vehicle costs. This could also possibly include eating out and medical expenses.
It’s worth noting that when you’re older, you get cheaper drugs and travel costs through possible concession cards.
After all of that, could you live off the age pension?
Yeah, maybe, or maybe not!
Millions of Australians are already doing that.
There is one crucial component to all of the above. Do you own your home outright or will you by the time you retire?
If you don’t, you will most likely face large ongoing costs. That will make the whole retirement question untenable.
That’s why, I believe, owning a home that you can live in when you retire is a key part of any financial plan.
Do you own your home?
If your answer is “yes”, then retirement looks more attractive for you, and you probably feel a huge weight lifted from your shoulders.
Then if it’s “no”, well, then, it’s time to come up with a plan to ensure your private savings and home ownership status are positioned to give you the retirement lifestyle you want, and you certainly deserve.
If you have no clue, I would suggest tracking your spending to find out your expenses.
Either way, your answers will point you in the direction of a better financial future. Then you will know if you can live on the age pension?
Need help analysing what your retirement may look like? Contact us today here at Financially Sorted via email on [email protected] You can also call us on 03 9888 3175