Ask the Expert: Your biggest super questions of 2023 answered

Last year was a massive year for super, and there were a lot of questions for our resident expert.

From transitioning to retirement to acquiring a seniors health care card to building assets, these were the biggest super questions our readers had in 2023.

Question 1

My wife and I are fortunate, we both have superannuation paid as a pension. We have both around $300k in super – I have managed funds $242K and she $567K.

We own our principal residence and because we live in a country town with absolutely no amenities we have a small residence in Adelaide (about $500K in value) which we do not rent (we use it for our personal health requirements). What do we need to do to be eligible for a Commonwealth Seniors Health Care Card.

For those that are age pension age but not eligible for the age pension (i.e. self-funded retirees), and hence also not eligible for the pension concession card, the Commonwealth Seniors Health Care Card (CSHCC) is worth applying for as it provides access to a number of federal government concessions including reduced cost medicines.

However, concessions provided by state and local governments vary with the CSHCC.

There is no asset test with this card, only an income test.

Both major parties went to the last election promising to increase the limit on the income test, which has recently just passed into law.

The income test is now very generous, as per below (as at January 2023)

  • $90,000 a year if you are single
  • $144,000 a year for couples.

Any investment and employment income is taken into account and your superannuation pensions are deemed to earn a certain return, not the actual payments received.

From what you have provided you should be eligible. You can apply via the Services Australia website.

Question 2

  • (a) Does your superannuation balance affect your ability to get the age pension? Does the overall balance or the income received from that balance count as an asset when applying for the pension? How much can I have in super before the pension is not attainable?
  • (b): I am 63 years old and my wife is 56 years old and we earn around $140k per year. We have our own home valued at $600k and an investment property at $450k. Currently, our combined super is $350k. How much would we receive from the government pension, if I was to retire?

I will answer the above two age pension questions together.

Once you attain age pension age your super balance counts towards the age pension asset test.

Under the income test, whether the funds are in super or you have started a pension with them, they are ‘deemed’ to earn a set return, and this amount is then counted, regardless of actual return or income received.

As at April 2023, you can have the following amounts and receive a full or part age pension:

Below are examples of the level of annual age pension that would be payable for a given level of assessable assets, provided the income test does not apply, assuming you are a home owner, is as follows:

The age pension age has been gradually increased to 67. Anyone born before January 1, 1954 is already age pension age.

For people born after January 1, 1954 the following applies:

Question 3

  • I was reading the question from a reader about “super being dangerous” and would like to assure them super is good. We have two super accounts – Commonwealth Super (DFRDB) and CFS from QSuper – all organised into fortnightly income and we both get a part age pension, again all organised by a financial planner. We pay no tax and have an income of about $78,000.  Best thing I ever did was to see our planner well before I retired. I am 74 and my wife is 75. 

I love your positive comments and that you have taken the time to respond.

People getting close to retirement often worry or have a fear of running out of money, but the reality for most is that they do just fine in retirement.

As you have said, it’s finally a time when you have less responsibilities, can travel and if you have built a super nest egg, live reasonably comfortably.

However, super is still not well understood and the fear of running out of money is often exaggerated. In fact, the Retirement Income Review found that:

‘‘Most retirees leave the bulk of the wealth they had at retirement as a bequest’’.

In other words, most retirees didn’t spend their super during retirement.

Many who took this approach did so because they feared running out of money. Research indicates that it’s younger people with a mortgage and children who are more likely to be struggling, and they find it easier money wise in retirement.

I’m not discounting that there are some who are finding it tough in retirement, especially renters with little or no super.

However, many people should take a positive outlook into retirement and hopefully get to enjoy themselves.

Question 4

I have $400K in accumulative super and $200K in income stream. Do both count as asset? Can I sell my unit and buy a more expensive property by withdrawing a lump sum from my accumulative super account to reduce my assets? Will I qualify for the age pension in doing that?

The $400,000 in accumulation will count as an asset once you attain age pension age.

You could withdraw funds and buy a more expensive property if your only goal was to get the maximum age pension, as your principal home is not asset or income tested. However, this is not always the best strategy.

More importantly is living in a home and location that you enjoy. You could start drawing down on your super to live a comfortable retirement.

Once your super funds start to deplete, your age pension entitlement starts to go up. That is how the system is designed.

My advice is generally not to have too narrow a focus, whether that be in age pension or tax etc. – take a balanced approach, always keep some funds up your sleeve for emergencies, and enjoy your retirement.

Question 5

  • When various writers and online calculators write about and cite savings needed to comfortably retire on, they assume a certain level of growth from that asset. With varying levels of risk aversion this would be different and hard to decipher.  Would you be able to give an estimate of what would be needed for someone who is quite risk averse and mainly using term deposits or interest-bearing accounts.

Firstly, you make a good point in terms of assumptions.

Website calculators make default assumptions in relation to things like:

  • Rates of return
  • At what age you will retire – this can make a huge difference
  • Retirement income required
  • Inflation rate
  • Other assets
  • Age pension information.

You can generally go into the assumptions and make changes to better reflect your own circumstances, but most people don’t, and it’s quite often very confusing.

One of the most difficult things in answering your question is working out what you mean by ‘comfortably retire’.

Again, I would have to make a whole bunch of assumptions that may not be relevant to you.

There are four main levers you can adjust that will affect your retirement, and that should be able to be adjusted in any good retirement calculator:

  • How much you will contribute to super
  • What age you will retire
  • How much you want to live on in retirement
  • The rate of return/how much investment risk you are willing to take on.

For anyone reading articles or listening to someone telling you how much you need in super, bear in mind that they would have made some big assumptions in the above points which could be totally irrelevant to you.

So, unfortunately, I can’t give you a figure.

However, I can suggest you use Moneysmart’s retirement calculator. And make sure you adjust the information and assumptions to match your situation.

Question 6

  • I’m over 65 and still working part-time. I am considering moving my super into a Transition to Retirement phase account because I understand earnings are not taxed. If I move my super into a Transition to Retirement phase am I required to draw money from it?

Just a couple of points of clarification.

While you may be ‘transitioning into retirement’ by working part-time and possibly starting to draw on your super, as you are over 65 you will have a regular account-based pension, not a Transition to Retirement pension.

I know, it’s confusing.

If you were under 65 you could only use a Transition to Retirement pension, and investment earnings on those are taxed at 15 per cent, the same rate as regular super. Although payments from the pension are tax-free if you are 60 or older.

But as mentioned, as you have attained 65, you can set up a regular account-based pension where indeed all investment earnings are tax-free.

Yes, whether it’s a Transition to Retirement pension or an account-based pension, you are required to draw down at least minimum amounts each year.

The minimum is a percentage of your account balance and is based on your age, as per the table below:

Craig Sankey is a licensed financial adviser and head of Technical Services & Advice Enablement at Industry Fund Services

Disclaimer: The responses provided are general in nature, and while they are prompted by the questions asked, they have been prepared without taking into consideration all your objectives, financial situation or needs.

Before relying on any of the information, please ensure that you consider the appropriateness of the information for your objectives, financial situation or needs. To the extent that it is permitted by law, no responsibility for errors or omissions is accepted by IFS and its representatives.

The New Daily is owned by Industry Super Holdings

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