Over the past 10 years the rules to Centrelink have changed considerably. They are set to change again in January 2017 (read our article 'Changes to the Age Pension rules — will you be affected?' on this change), however many people nearing retirement don’t understand how Centrelink may fit into their retirement plan.
Get the Centrelink benefits you deserve
Cuts, cuts, cuts, is what we hear in the media.
One of the good things about the changes is that it is actually more straightforward than it has been for years to get the benefit you deserve. Quality retirement planning must therefore make whatever you have accumulated work as hard and as long as possible, to complement any possible Centrelink entitlement.
If you are nearing retirement and are worried you have not accumulated enough, you may well be eligible for a Centrelink contribution either immediately when you retire or at some stage throughout retirement.
Understandably, it is generally a worrying time for people as they near retirement. It dawns on them that it will not be long before they cannot meet their basic needs, let alone their more extravagant ones, like travel, from their income-earning ability and instead need to rely in full on what they have accumulated through life.
Centrelink, with all of its changes, will factor in how much in assets you have and how much income you earn. Once you become eligible, it is only necessary to know when to apply.
Include Centrelink in your financial plan
Where a financial plan is so valuable for pre-retirees and people actually moving into retirement is that we consider Centrelink entitlements into the future. While Centrelink is a moving target and it is prone to change, it is reasonably safe to assume there will be some ongoing Centrelink support and therefore reviewing how retirement could look with present entitlements considered, can give a huge amount of peace of mind and confidence.
One thing seldom spoken about is that income needs are usually not the same for the whole of retirement and yet this is how income projection calculators work. They just work on how much you want to retire on, then factor in an inflation increase to life expectancy.
In reality, most people have greater income needs between retirement and about 80 years of age, while their health and fitness is better. Spending needs gradually reduce after age 80 due to decreased mobility.
For this reason we work with our clients to understand what their specific needs are. The better we understand how you envisage retirement could be, the better we are able to tailor our financial modelling for you, to meet what you want for your retirement, not just a one dimensional one size fits all approach.
This is an important point for retirement planning and an important point for understanding how Centrelink factors into your retirement. Depending on what your starting need is for income, Centrelink can transition over time to make up say 10% of your income and increase to say 80%, but still support an income that is not too dissimilar to what the median income for a couple is.
How you plan for your retirement and how you structure your assets to meet your longer term financial needs could make a big difference to whether you have enough in retirement and certainly to your peace of mind throughout retirement.
"GOOD FORTUNE NEEDS GREAT PLANNING"
WANT TO LEARN MORE ABOUT AGE PENSION?
We're lucky to be joined by Prashant Nagarajan at our Age Pension seminar in Melbourne on Wednesday 20th July. Come along for more tips, advice and information about the Age Pension and upcoming changes. Click here for more info and to rsvp.
The content of this presentation is intended to be general information only and has been prepared without taking into account any person’s objectives, financial situation or needs. Each person should consider its appropriateness having regard to these matters or obtain relevant professional financial advice before making any financial decisions. Examples are illustrative only. Each person should obtain any relevant professional financial, taxation and social security advice before making any financial decisions.