Retirement trap hurting saving Aussies

Be aware:  Australians are being warned that they will need half a million dollars to escape the “retirement trap” of a reduced pension due to assets meeting certain thresholds.

 

 

According to BetaShares, retirees who lift their savings to between $350,000- $600,000 may ironically see their income diminish.

BetaShares senior investment specialist Dr Roger Cohen said, “Common wisdom tells us that accumulating more savings through our working lives should result in higher income in our retirement years.” 

“However, our analysis shows that, for certain people, under the current system, accumulating more money can actually produce the reverse.”

The current retirement system in Australia sees retirees drawing income from a combination of superannuation, the Age Pension and external assets. 

The pension is means-tested, with the level of entitlement calculated using an income test and an assets test. These entitlement levels and associated reduction in the pensions are the primary drivers behind the “trap”.

More specifically, for an individual, there is an income range between $174 and $2,026 per fortnight, where for every additional dollar earned, the pension is reduced by 50 cents. This effectively halves the value of additional earnings for retirees in this range.

 

Cameron Micallef
24 January 2020
smsfadviser.com

 

Have a Question?

Contact us to book your initial free no-obligation consultation with our expert advisors.

Your privacy is important to us and Charter Financial Planning, which is part of AMP. You may request access to your personal information at any time by calling us on (03) 9429 2001 or contacting AMP on 1300 157 173. Information collected will be subject to AMP's Privacy Policy. You can also contact us or AMP if you do not wish to receive information about products, services or offers available from us or AMP from time to time.