Boomer with nearly half a million dollars in assets plus her own home laments loss of pension

A baby boomer complains that she doesn’t want her pension to be cut, even though she has nearly half a million dollars in assets and owns her own home.

The 75-year-old woman said The Western Australian She feared her biweekly retirement pension would be cut because she stood to inherit $300,000.

She explained that she had $160,000 in a retirement fund based on a superannuation account.

‘Since I can no longer supplement my pension due to my age, can you advise me on the options I have to optimise my cash flow, including my old-age pension? And is there a grace period during which I can decide how I want to restructure my finances?’ she asked.

Columnist and financial planner Nick Bruining calculated that the woman would also have a car and household effects, which would increase her wealth by $30,000.

He said the $300,000 inheritance would bring the total to $490,000.

“This puts you about $176,000 over the $314,000 threshold for a single homeowner and you are likely losing about $528 per fortnight on the full rate of $1116.30,” he wrote.

Mr Bruining suggested that the woman could use the money to make investments, such as renovating her home. In doing so, she wanted to take advantage of a loophole in the law that exempts the family home from the assets test.

A baby boomer complains that she doesn’t want her pension cut, even though she has nearly half a million dollars in assets and owns her own home (stock image)

“When you spend money on your home in this way, you are essentially moving money from a taxable asset (a bank account) to an exempt asset (your home),” he wrote.

Mr Bruining said the woman could also spend the money on a luxury holiday or the costs of her funeral.

“You can also invest money in a special funeral fund, where the money is only released when you die,” he wrote.

‘Up to $15,500 invested in this way is exempt from Centrelink’s means test.’

A single retiree is now entitled to $1,116.30 every two weeks if he or she earns less than $212 over the same period.

For incomes of more than $212 per fortnight, the pension is automatically reduced by 50 cents for every dollar above this amount.

“You may also consider upgrading your car. While the value of the new car is still a taxable asset, the value immediately drops,” Bruining said.

‘You can use the value of the car when it is sold privately for Centrelink purposes. This can be up to 20 per cent less than the amount you pay for it.’

A single retiree currently qualifies for $1,116.30 per fortnight (stock image)

Data from Super Consumers Australia shows that $279,000 is enough for a modest retirement for a single person, as long as he or she owns their own home and keeps annual expenses to $41,000.

For couples, this amount is slightly higher, at $371,000, while an expected annual expenditure is $60,000.

The family home, also known as the main residence, is exempt from the assets test if the person lives in the home or has not been in the house or apartment for less than two years.

But once they are sold, the proceeds from the sale are included in the assets test.

Investment properties, including properties that are rented out, are also subject to the government’s asset test.