Question: I am a widowed female retiring (past retirement age) with a modest superannuation of around $163,000. I can access a full pension but am unsure how to manage the super. I have discussed with my industry fund advisor but remain confused. I have been a professional over my working life. Now have simple needs. Thank you

Answer: If you are over the Age Pension age, then you may be eligible for a full age pension of $944 per fortnight (including supplements).

With your superannuation, you could convert the funds into a regular income stream.

To give you comfort around your finances, there are strategies and products you could use to ensure the income stream from your super provides you with regular income on top of the age pension and isn’t depleted too quickly. For example, you could draw the minimum from an allocated pension, or allocate some funds to a lifetime guaranteed annuity.

Speaking with a financial adviser with whom you feel comfortable will help you make an appropriate decision.

Question: How much money can I have in my superannuation fund and still be eligible for at least some Aged Pension?

I will be retiring soon and even though I would like to contribute as much as possible to my superannuation, I don’t want to do it to a point that I no longer qualify for the pension, as I will need the benefit of having a health card, reduced power and electricity etc, which I won’t get if I am a self-funded retiree. I know I haven’t got enough in my superannuation fund to be able to live comfortably off it, and I don’t want to be worried about not being able to make ends meet all of the time.

Assuming you meet the age, residency and other requirements, there is both an income and asset test that is applied to be eligible for the age pension. The corresponding limits depend on whether you are single or have a partner, and whether you are a home owner or not.

For a part age pension, your assets must be less than $583,000 if you are a single home owner, or $876,500 if you are a member of a couple. Your principal home is not included in the asset test. For non-home owners, the cut off is $797,500 for single people and $1,091,500 for couples (as at July 2020).

There are also a couple of additional points worth remembering. Even if you start off as a self-funded retiree, once you start drawing down funds and your assets/income fall below the relevant threshold, you will then become eligible for a part age pension.

Once you are eligible for an age pension, you are also entitled to a Pensioner Concessional Card. However, if you do not immediately qualify for the age pension, you may qualify for a Seniors Health Card, which has no asset test, a generous income test, and provides a lot of similar benefits to the pensioner card.

Question: My husband and I will not have a lot of super for when we retire in around 10-15 years, as we were not high-paid employees. I was wondering if you think it’s a good idea to invest into a property to help with the retirement. According to my calculations, if we are to invest into a property worth $650,000, the rent will cover most of the interest we have to pay and we will just have to outlay other expenses, which we can afford. Do you think it’s a good idea? There will not be much negative gearing, as we can’t borrow a lot and the rent is reasonable compared to the current interest rate payable. Thank you. Mrs Peres

It’s unclear from your question how much of the $650,000 is coming from your own money and how much is intended from an investment loan. You have stated that you won’t borrow much, so I will assume most of the funds you have are available now.

Investing in property is certainly a popular way to invest in Australia. Only borrowing a small amount does lessen the risk, but having most or all of your investment in one property does leave you exposed. It creates diversification risk, as it means you have all of your eggs in one basket.

To be a successful investment, the property would need to achieve capital growth, after costs, over the period you hold it. So selecting an appropriate property would be crucial. Also, you should be aware of all the costs before proceeding.

You could compare investing in a property with investing in a diversified portfolio of shares, managed and term deposits, whilst also looking at superannuation. I would recommend seeking professional advice to take into account all of your personal circumstances before proceeding.

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 whilst 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.