Retirement income and benefits

You may first decide to take a lump sum from your Super to pay off any debt, have a holiday and make any necessary purchases.

Your nest egg could provide a regular income stream through a pension or annuity.

Pensions - are only available from superannuation funds and can only be purchased with Superannuation benefits.

An Annuity - can be purchased from life insurance companies using Superannuation benefits or, in some cases, other savings. An Annuity guarantees to pay a set income for a set period of time, either a number of years or for life. There is no capital left at the end of the specified period. The income may be indexed each year, often in line with inflation.

Where to invest?

Understanding how long you may need your income to last will play a role in deciding where to invest. And remember to factor in the impact of inflation. If your after-tax income doesn’t keep pace with inflation, your buying power and lifestyle could be compromised.

You should do your research and get expert advice. As for the basics, your choices broadly include:

• An income to last for a specified term – which may leave you reliant on the age pension after the term ends.
• An income that depends on the investments you select rather than a set term – which may leave you reliant on the age pension when your account is exhausted.
• An income that’s guaranteed for your life and/or your partner’s life.

When will you need more income?

Would you prefer to have greater income in the first few years of retirement, or do you want the security of knowing your money will last and you won’t have to rely on the age pension?

Your risk profile

Generally, the higher the potential returns, the greater the risk. Some people wouldn’t worry if part of their investment suffered short-term fluctuations. But they’d be a lot less comfortable if they invested in a highly speculative area and lost their entire nest egg.

Diversify

Just as when you are building wealth, diversification is one of the keys to investing in retirement. 

Remember the tax benefits

If you’re over 60 and receive either a lump sum or a regular income (such as through annuity or a pension) from a taxed source (e.g. a complying superannuation fund) then it’s tax free.

Making your money last can be a challenge but there are steps you can take.

Manage your budget - One way to make your money last is to watch your spending. If you need help you can use the ANZ Budget Planner.

Earn more money - More and more Australians are choosing to work part time before moving to full-time retirement. Policies such as Transition To Retirement and the Government's Work Bonus incentive program are designed to reward you for staying in the workforce.

Find out more at MoneySmart.

You may also decide to work in a less formal sense, with odd jobs or seasonal work while traveling (you may like to check out the Harvest trail through the Jobsearch network. There are also a number of private websites that specifically cater to retired Australians looking for part time work.

Remember your benefits – if you’re receiving a government pension, you should talk to Centrelink to determine how earning an income may impact your pension.

Banking – Your everyday banking should be designed to suit you and your new lifestyle.

Selling the family home – it’s a big step but can bring dividends. As your principle place of residence the sale is likely to be free of capital gains tax. However consider:

• The costs of the sale and new purchase can all add up. After legal fees, agent fees and stamp duty, make sure you’ll finish with a reasonable profit.
• Make sure you know exactly what the new property will cost. Factor in things such as new furniture.
• Can you afford to buy in the same area as your family and friends, or will you need to move to a less expensive area.

You could be eligible to receive both the Age Pension and the Pension Supplement, which provide assistance with things such as prescription drugs, utility payments, your phone bill, travel and so on.

Your eligibility will depend on you meeting the age and residency requirements.

The age at which you can access the age pension is gradually increasing and will be 67 for men and women by 2023. Right now men can receive the age pension from 65 and women can receive it from age 64. But you can find out what applies to you at Centrelink. 

How much (if any) pension you’re entitled to depends on two things:

• Your assets
• Your income

The assets test

Assets can include cars, boats, home contents, savings and investments. Any money owed on these assets is taken into account.

The income test

Income can include any income generated by working or from investments.

Deeming

A pensioner’s income from financial assets is assessed under a set of rules called ‘deeming’. This is a system where the government deems you to be earning a certain rate of return on your investments.
If you can achieve better returns than the deemed rate then you earn more income without impacting your level of pension.

You can obtain more information about pensions at Moneysmart or Centrelink or by calling 13 23 00.

If you do receive a pension you may also like to ask about Centrepay, a free direct bill paying service.

Retirement is not the time to be taking risks with your assets. Insurance products can help protect your home, car and other valuables.

You should also check that your policies guarantee things like new for old replacement and full building replacement. While insurance is about peace of mind, the last thing you want is to find you’re not sufficiently covered when you really need it. 

Review your insurance with an expert - in some cases you may even find yourself over insured. If the kids have left home and you’re debt free with a secure retirement income there may be no need for life insurance. 

There is a range of benefits available for retirees and you should make sure you receive all of your entitlements.

The Commonwealth Seniors Health Card - is provided by the Federal Government and gives older Australians (who pass an income test) concessions on prescription medicines through the Pharmaceutical Benefits Scheme.

The Seniors Card - isn’t means tested and is available to any Australian resident who is over 60 and not working full-time. This card can give you access to discounted travel on public transport, concessions at major sporting and cultural events, free access to selected museums and a variety of other discounts from the private sector. Different discounts apply in each state and territory.

The Seniors Supplement – is available to self-funded retirees who are eligible for the Senior Health Card or the Veterans Affairs Gold Card. It provides regular cash payments to help with bills such as energy, rates and motor vehicle registration fees.

Government loans – this is a scheme designed to provide money for people to live on. If you’re not on the full pension due to your income or assets (but not both), you may be able to use your real estate as security for a loan.

Carer Allowance – if you’re receiving a pension and also caring for someone you may receive further support.

Medicare Safety Net – this will reduce the amount you pay for regular visits to doctors and specialists.

Pharmaceutical Benefits Scheme (PBS) Safety Net Card - Once you spend up to the threshold, medicines will be less expensive or free for the rest of the calendar year. You can apply at your local pharmacy.

Working - you may also be entitled to tax concessions and bonus payments.

Veterans – as a Veteran you can receive a number of different entitlements and even access your pension five years earlier than the age pension. Contact The Department of Veterans Affairs on 13 32 54.

Need help? You can work through these issues yourself with the various government departments, or talk to an ANZ Financial Planner who can help you.

Maximising your retirement income and taking advantage of any benefits for which you qualify can play a big part in allowing you to have freedom to enjoy your retirement.

ANZ 50+ Benefits: Depending on your situation and the products you choose, your benefits could include fee waivers or bonus interest.

An A-Z Review^® with an ANZ Retirement Banking Specialist: during a complimentary A-Z Review^® an ANZ Retirement Banking Specialist can help explore ways to maximise your returns and protect what’s important to you. Request an A-Z Review^® at your nearest ANZ branch.

An ANZ Financial Planner can look at your options for generating income in retirement through annuities, Superannuation and other investments, while taking advantage of any tax benefits available to you. Your initial discussion is complimentary and without obligation. 

• Make an appointment with a Financial Planner.

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ANZ Financial Planners are representatives of Australia and New Zealand Banking Group Limited, ABN 11 005 357 522, the holder of an Australian Financial Services licence.

The information provided is general information only and does not take into account your personal needs and financial circumstances and you should consider whether it is appropriate for you. Before making any decision to acquire, hold or sell any financial product, ANZ strongly recommends that you seek financial planning and/or tax advice and read the relevant Product Disclosure Statement and/or Terms and Conditions.