A regular income in retirement

When a lump-sum super withdrawal runs out, or returns are not as expected, what happens then?

A regular income in retirement

Many Australians have traditionally taken a lump sum payment from their super in retirement, but when this runs out, or returns are not as expected, what happens then?

Some people assume they will receive an Age Pension paid by the Government should their lump sum not last as long as their retirement years. However, the tightening of the rules applied to the Age Pension from January 2017 means people may find themselves being disappointed by how little, if any, income support they actually receive.

Understanding that there are options other than taking a lump sum which may see your super savings last longer, but also may result in you receiving a part Age Pension, is the first step to securing a comfortable retirement.

Taking an income from your super through a retirement income account enables you to know exactly how much income you will receive each fortnight, from which you can then calculate how much Age Pension you may receive from Centrelink. Of course, the benefits of receiving even a part Age Pension extend beyond the monetary value. As a recipient of a Government Age Pension payment, you will also currently be eligible for a concession card, giving you access to reduced prescription medication, utility and rate concessions and many more savings.

By taking just a minute or two to enter some basic details into AustralianSuper’s Age Pension (Centrelink) Estimator, you can get an indication of how much, if any, Age Pension you may receive. This can assist with any discussions you have with a financial planner to ensure you get the best outcome from the superannuation you have accumulated.

According to Paul Johnston*, a financial planner who works with AustralianSuper members, “Independent modelling has shown that retirees with super balances of $100,000 can achieve a retirement income that is 25 per cent more than the full Age Pension and an additional $110 a week. So even relatively modest super balances can make a significant contribution to your income in retirement.”

* Paul Johnston is an Authorised Representative of Industry Fund Services Limited ABN 54 007 016 195 AFSL 232514

This article has been sponsored by AustralianSuper Pty Ltd ABN 94 006 457 987, AFSL 233788. The views expressed are those of YourLifeChoices and not necessarily those of AustralianSuper. For more information, please visit www.australiansuper.com/yournextlife





    COMMENTS

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    MICK
    6th Dec 2015
    10:20am
    "retirees with super balances of $100,000 can achieve a retirement income that is 25 per cent more than the full Age Pension and an additional $110 a week"

    What a lot of BS. That's a return on capital of around 30%. That would need more assumptions than Peter Pan flying to the moon and back on one breath.

    Explain that one please.
    Blessed
    6th Dec 2015
    12:35pm
    I agree that does not seem to make sense to me either
    heyyybob
    6th Dec 2015
    12:42pm
    Dead right Mick !! That REALLY is BS I think :( Info from a 'Financial Planner' might be a clue ;)
    LiveItUp
    6th Dec 2015
    1:50pm
    Certainly no BS as you put it. Just simple maths.

    $100,000 will give $110 per week for 17 years without earning any interest.

    Guess what folks you can spend your capital in retirement. Why leave it for someone else to spend on a holiday to Disneyland?
    Anonymous
    6th Dec 2015
    2:27pm
    It's BS. Only an idiot would draw $110 per week from capital and call it ''earnings''. What happens after 17 years? If I follow the pattern of my female ancestors, I might live 37 years in retirement. Given the rhetoric we are hearing from the Government and the economic situation in Greece (which might well happen in Oz the way things are going), I want to hold on to my capital in case there are no pensions or grossly inadequate pensions down the track.
    Anonymous
    6th Dec 2015
    2:29pm
    And I wouldn't be leaving it to someone else to spend on a holiday to Disneyland. I'd be leaving it to a disabled grandchild to ensure he can live in reasonable comfort, because the Government sure won't provide a comfortable lifestyle for him - and won't cover many of the medical and pharmaceutical bills he'll incur or the cost of the special aides he'll need.
    LiveItUp
    6th Dec 2015
    2:42pm
    If we become another Greece then you will get a haircut on your capital anyway so why not start spending it and get a life now.
    Blessed
    6th Dec 2015
    12:37pm
    I agree with Mick, that does not seem to make sense to me either.
    Sundays
    6th Dec 2015
    1:06pm
    For this site to maintain credibility, these claims need to be backed up with facts. More info please!
    heyyybob
    6th Dec 2015
    1:34pm
    Agreed !!
    LiveItUp
    6th Dec 2015
    1:57pm
    Simple Facts.

    $110 per week = $5720 per year.

    $5720 x 17 years = $97240

    That leaves $2760 for year 18.

    Over these 18 years you will earn a bit of interest too so depending on your interest it might stretch to 20 years.

    Retire at 65 so 20 years later you are 85.

    OK you may lives a few more years but will you still need to extra $110 per week then?
    Anonymous
    6th Dec 2015
    2:31pm
    Drawing capital is NOT earning, Bonny. This is the type of BS we expect from a greedy and economically irresponsible government that has no respect for older Australians.

    Yes, the way things are going we probably WILL need a lot more than $110 a week in 18 years time - and I could live another 19 or more years after that.

    Besides, what will $110 buy in 10 years time, let alone 17 years, given the rate of inflation?

    It is just plain stupid and irresponsible to suggest people should spend their capital in the early years of retirement.
    LiveItUp
    6th Dec 2015
    2:40pm
    I can't see anything wrong with this at all. If one wishes to not spend their capital and live a lesser life than they could then so be it. I call it stupidity myself.
    Anonymous
    6th Dec 2015
    7:13pm
    this is why we have a problem too many bludging pensioners who think they have a right to free money from the government I don't see why we don't put these bludgers on food stamp stamps
    Young
    6th Dec 2015
    2:14pm
    How did this Paul Johnston get his job??
    Anonymous
    6th Dec 2015
    2:32pm
    How much is he being paid to mislead clients about finances in retirement?
    LiveItUp
    6th Dec 2015
    2:56pm
    He is not misleading anyone about their finances he makes perfect sense to me. I have explained it all above.

    6th Dec 2015
    2:32pm
    I think Paul may also sell used cars in his spare time.
    bohemian
    6th Dec 2015
    3:01pm
    The older you get the more money will be needed to fund aged care such as a package from the government's Aged Care Reform. I would suggest to save as much as possible because the packages is dependent on your ability to pay. If you can't pay then how will you get the help? Just think about it.
    LiveItUp
    6th Dec 2015
    3:44pm
    Why? You get the same service if you have money or not. Same with nursing homes.
    bohemian
    6th Dec 2015
    3:05pm
    I have done some research in this area so will be happy to provide further information if there are any queries.
    Anonymous
    6th Dec 2015
    5:34pm
    More than Paul?

    6th Dec 2015
    3:18pm
    Well, that makes the interest about 5.75% to achieve $110.00 per week income from $100K. I'd like to see the proof that super funds are in fact earning this. I think there is a flaw in the article in that income from super for eligible retirees doesn't all show as income for Centrelink purposes but the amount held in super does count as an asset. I'd much prefer an independent person to tell me these things rather than one attched to any super fund.
    bohemian
    6th Dec 2015
    6:52pm
    Ideally, any type of investment including super need to grow to keep up with inflation over time. Making it last for as long as you need it is the key, rather than concentrating on how to spend it. For some people,time spent in retirement can be as long as when working. The money invested has to last for as long as possible to cover all eventualities.

    6th Dec 2015
    7:05pm
    Lets face it pensioners are bludgers and losers and are killing the Government trying to recover from the labour governments deficits why are they even considered
    Peterrj
    6th Dec 2015
    7:19pm
    "According to Paul Johnston*, a financial planner who works with AustralianSuper members, “Independent modelling has shown that retirees with super balances of $100,000 can achieve a retirement income that is ... an additional $110 a week.".

    If you look closely he is not saying that a mere $100,000 in Super will earn you an income of $110/week but you can draw dawn $110 extra on top of your Aged Pension. If you do that then yes you can draw down $110/week for the next 17 years even if the $100,000 did not earn any interest!!!! See above post for the stats!!!!

    So $110/wk X 52 weeks gives you an annual income of $5,720/yr!!!!

    If, and it's a big if, if interest on the $100,000 is just 5.7% then the $100,000 is a magic pudding earning $110/week for life and keeping the balance of $100,000!!!

    OK, Buying power over 'life' will diminish but, yes, an extra $110/wk is possible!!!!!

    And if you only have $100,000 in Super then yes, you can, emphasis on can, add an extra $110/wk to your Aged Pension payment!!! That's a boost to your Aged Pension fortnightly sum of a whopping $220 for life and still receive the full Aged a Pension!!

    So all those who say BS, like I first thought, then do the maths and report back!!!! If I have the maths wrong then feel free to say so provided you accept the assumptions made: That Super pension payment will be tax free and that the Super fund will turn a modest 5.7%!return each year!!

    To All the BS'ers, now is the chance to prove that Paul's stats are BS!!!! (Can we just drop attacks on Polly's and those lucky Btd's with cash in Super because they have rorted the Tax System!!! Those comments are getting a bit boring!!)

    PS Rainey, Paul did not say the word 'earnings' in the article above!!! Duh!!!
    Adrianus
    11th Dec 2015
    11:23am
    Peter, you left out the important part......."that is 25 per cent more than the full Age Pension and an additional $110 a week."
    And an additional meaning in addition to.
    niemakawa
    6th Dec 2015
    8:14pm
    I believe your have to withdraw a minimum amount (capital)from your Super. each year. Anyway once it has gone, then anyone has the right to claim a State pension.
    KSS
    6th Dec 2015
    9:00pm
    Yes between 55 and 64 you have to draw a minimum 4% a year. 4% of $100000 is $4000 less than the $110 a week suggested. This rises by 1% every 10 years, then 5 years to 7% to 80 to 84, then 9% to 89, 11% to 94 then 14% from age 95.

    People may be living longer but still relatively few will reach the lofty heights of 95 plus.
    Peterrj
    6th Dec 2015
    9:16pm
    Yes to both questions. Note: if you have 'nothing' then you have a right and are entitled to claim the full Aged Pension! But you don't have to spent it 'all'. Depending on income and assets you can claim part Aged Pension at pensionable age!
    Peterrj
    7th Dec 2015
    3:24pm
    Stop the press, my comment above is inaccurate without a rider. You can spend as much as you like and getting rid of a couple of buckets of money is taxing and rather difficult but if it is all gone ie. Spent on yourself, then yes you can claim the Aged Pension. But if you 'gift' it way then apart from $30,000 then the rest is deemed to be still in your possession for the next 5 yrs! Afte 5 yrs the financial clock is reset ... So gifting to make it all gone makes the 5 year gifting rule to apply.

    BUT getting rid of all assets may not be a very wise move. If this is your 'go' then getting rid of all assets down to the minimal level to qualify for the full Aged Pension may be a better outcome. That way you will drawn down on you Super Account and boost the full Aged Pension payment!

    It's a game and the very generous welfare payment of the Aged Pension is the frosting on the cake.

    When playing this game no assumption is reliable except one : For no investment except getting old gives you the Aged Pension indexed to the CPI ... There is no better return on your money ( or lack of it) than what the Aged Pension pays!!!

    And as Y L C advocates, the Aged Pension is your entitlement!!! I intend to collect my entitlement ... Unless, of course, the Aged Pension is NOT an entitlement and most YLC postings and YLC is wrong!

    It's Aged Pension aka Catch 22! Me, I think that we all should get the Aged Pension but my view does not count.
    Mr Bent
    8th Dec 2015
    6:52am
    Robbo go away, your only shit stirring and offer nothing to this discussion
    Peterrj
    9th Dec 2015
    2:40pm
    Robbo said: "'Lets face it pensioners are bludgers and losers and are killing the Government trying to recover from the labour governments deficits why are they even considered."

    Yes, there would be some pensioners who bludged their way to the pension money BUT is is wrong to cast all pensioner into that basket. There are almost uncountable reasonable reasons why a person may go onto the Age Pension and calling them bludgers and losers is totally unacceptable.

    Robbo, you need to tone your language down OR rephrase your thoughts into a more reasonable proposition!!!!

    However, no matter what, the welfare bill for Australia is getting out of control and cut backs to welfare payments have to happen!
    Adrianus
    11th Dec 2015
    11:11am
    I think the first 25% represents around 5.7% income and the second $110 per week is based on a draw down of capital.
    The problem I see with this "Independent Modelling" from Australian Super is that by drawing down on the capital your first 25% will be short lived and diminishing because of a diminishing capital base. The assumptions also don't take into account the effect of inflation, which by the way will be higher than expected if GST is increased and expanded.
    When it comes to living off dividends produced from capital invested for an undefined time horizon some capital growth should be a priority.
    We may all have different needs but I like the creative thinking from this Financial Planner. If nothing else it exposes us to other possibilities.


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