Carol and Chung are married. Chung is 65 and is a retired engineer.
and Carol is 57 and is still working full time as an IT Project Manager.
Chung is receiving a moderate Centrelink pension payment and the Pensioner Concession Card.
They own their own home and have one son, Marvin, who has left home.
Carol is thinking about retiring at the end of the year as Chung has been retired for three years and she wants to join him in retirement so they can travel and enjoy their life together.
Carol says goodbye to her workmates and has a lovely retirement party.
What now? Carol has a couple of options to fund her retirement - she can either use her super to start funding their travel plans and retirement straight away…
…or they can try to find an alternative source of income. For instance, they no longer need such a large home so they could consider selling it and buying a smaller, less expensive home. The leftover money could be used to pay for their dream holiday and provide an income for Carol – saving her super for later when they really need it.

What is your choice?

Spend the super
That's what it's there for!
Sell the home
Buy a smaller home and go travelling!
Book appointment

Watch out!

Carol withdraws the full amount of her super of $250,000 and uses $50,000 on their dream European holiday.

Unfortunately, Carol realises she needs to pay 17 per cent tax (or more) on any super she withdraws that's over $195,000. That's over $9,000 she's lost in tax that she could have saved if she kept her money in super until age 60.

Also, since she is under 60, to access her super at age 57 she needs to sign a statutory declaration saying that she doesn't intend to work again, including part time work.

Also, they would need about $150,000 over the three years to fund her and Chung's comfortable lifestyle* in retirement. This leave them with only about $40,000 of super by the time Carol turns 60.

* ASFA Retirement Standard for a couple aged about 65 (June quarter 2016)
Choose again Continue

Watch out!

Carol and Chung decide to sell their large family home and buy a small apartment near their son. They have $900,000 leftover.

They spend $50,000 on their dream European holiday and put $850,000 in a savings account. Unfortunately the $850,000 is considered an asset by Centrelink and so Chung loses his pension and Pensioner Concession Card which could cost him dearly through the loss of benefits, such as:

  • discounts on Pharmaceutical Benefits Scheme (PBS) prescription medicines, bulk billed doctor appointments, cheaper out of hospital medical expenses
  • country rail travel
  • extra health, household, transport, education and recreation concessions that are offered in their state and by private businesses
Choose again Continue

The Explanation

Both these choices have consequences. By cashing out all her $250,000 super now, Carol pays at least 17 per cent tax on any amount over $190,000. They could live on this for a while but the super is likely to run out by the time Carol turns 62.

On the other hand, downsizing their home might seem to make sense, but the money left over is considered an asset by Centrelink and so Chung would lose his pension and Pensioner Concession Card which could cost him dearly.

See what happens if Carol decides not to retire at age 57 and continues to work to age 60.

Keep going to see what happens if Carol decides not to retire at age 57. You can also subscribe to our Bridges Insights emails or, if you need advice, ask us a question or make an appointment to talk to a Bridges Financial Planner.
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