The problems selling the family home

To have or have-not? What happens if Kevin sells the family home?

The problems selling the family home

Kevin* is considering selling the family home but has concerns about the repercussions for his part Age Pension and his retirement income when he has to rent. He asks retirement income specialist Noel Whittaker for guidance.

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Q. Kevin
If we sold our home and decided to stay ‘liquid’ and place the funds from the house sale into a managed fund, then our assets increase. We would then reduce our part Age Pension and, of course, need to pay rent. We would need a return of better than six per cent per annum to offset the rent and the reduced pension combined of about $7000 per annum. What would you advise?

A. If you are assessed under the assets test, there are different rules for homeowners as opposed to non-homeowners. However, if you are assessed under the income test, there is no difference in Centrelink treatment.

The only practical way to achieve an income of six per cent per annum is to buy high yielding Australian shares that are 100 per cent franked, or simply buy an index fund such as VAS, which is currently paying a running yield of four per cent plus franking.

However, you must keep in mind that you should not invest in shares unless you have at least a five-year timeframe in mind to enable you to ride out the inevitable market fluctuations.

I suggest you talk to a good financial adviser to try to achieve an outcome that suits both your goals and your risk profile.

Do you have a question you’d like Noel to tackle? Email us at newsletters@yourlifechoices.com.au

Noel Whittaker is the author of Making Money Made Simple and numerous other books on personal finance. His advice is general in nature, and readers should seek their own professional advice before making any financial decisions.

*Not his real name

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    COMMENTS

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    Mark
    2nd Oct 2019
    11:08am
    I don’t see the point in asking specific financial questions online. The advice always ends up the same. That is, “it’s best to consult a financial adviser to assess your individual situation “.
    Farside
    2nd Oct 2019
    11:43am
    slow news day so something unlikely to offend to fill it out
    adbob
    2nd Oct 2019
    1:30pm
    I think Noel is just covering himself by pretending not to provide specific financial advice.

    His advice is usually very good - provided you ignore the recommendation to consult a financial adviser, and treat that for what it is.

    Compare the fees for VAS (Vanguard Australian Securities) with what a "financial adviser" will rip out of you. Big ETFs like that are much the best value whn it comes to funds.

    Shorten's franking credit rip-off is the only danger there. If that comes back you'll be taxed on your earnings even if your overall income is really below the tax threshhold.

    Brilliant call there by Bill - instead of ScoMo wearing the opprobrium for stealing part-pensions from modestly funded retirees Bill draws it onto his own party with a proposal which would easily have been avoided by the big super balance holders.

    Labor will only become electable again when they cast Bill into outer darkness. Big challenge - he has many friends amongst the faceless men behind Labor - also many pals on Collins Street.

    OTOH there are also ETFs which don't rely on franking credits - eg overseas shares. I would certainly like to have more exposure to unhedged overseas shares as Australia declines under the weight of greenies and other challenges to our main foreign currency earners.

    That's a gamble. The AUD has already declined by a huge amount - but I fear it has further to go. We are definitely no longer the "lucky country" - but the "clever country" we certainly are not. For the moment we are the flog-off-what-we've-got country. When we run out of things to sell - what then?
    McDaddy
    2nd Oct 2019
    1:33pm
    adbob, weren't Pensioners exempt from franking credit changes under the proposed policy?
    johnp
    2nd Oct 2019
    1:40pm
    agree with mcdaddy. that was my impression also before the election. Re. Pensioners were to be exempt from franking credit changes
    adbob
    2nd Oct 2019
    4:35pm
    @McDaddy and johnp

    Yes - Shorten rowed back that far but still slugged the many people at the lower end of the self-funded retireee scale - the same people who had previously had their part-pensions stolen by ScoMo -without a squeak from kneejerk Shorten - and of course no proposal to reverse that at the election.

    Most of the people concerned live on less money than someone on a full age pension. In fact they are now being told to spend down their capital to top up their incomes. In other words the money which they saved because it was supposed to *supplement* their supposedly inadequate state pension now *replaces* it and, if they live long enough, they will have to spend it all down and eventually end up on that very same state pension.

    If they had known the truth ahead of time why would they have bothered to work and save - while others didn't - those others at the same time receiving an increase from ScoMo.

    The party of the forgotten people seems to have forgotten the forgotten people - and Labor (so-called) hasn't been a proper Labor party since Hawke and his mates back-stabbed Bill Hayden and sent him off to Yarralumla. Don't mention Paul er y'know Keating - although you can mention his daughter and the circles she moves in if you want.
    Mary
    2nd Oct 2019
    5:26pm
    Pensioners were exempted, Sfrs or very low income earners were not if their income was below the tax threshold. Under the Shorten policy proposal a rich Sfr or ANY politician etc that owned a share portfolio got to keep the credits. Yet the lowest income earners would have lost theirs.
    McDaddy
    2nd Oct 2019
    8:45pm
    Firstly Labor was against the Asset Test lowering, Libs got it through by giving the Greens something. The Age Pension is no longer seen as a right or entitlement, it is now meant as a safety net. You are supposed to use your capital to fund your retirement, that is how it works now in the 21st Century.
    johnp
    2nd Oct 2019
    11:53am
    A very poor response to his question !!
    Incognito
    14th Dec 2019
    2:50pm
    Here is a great article:
    https://jenman.com.au/help-for-the-elderly-in-real-estate/?utm_source=Neil+Jenman%27s+Consumer+Alerts&utm_campaign=1b2ebcb2ef-EMAIL_CAMPAIGN_2019_12_12_10_10&utm_medium=email&utm_term=0_ec5458b77d-1b2ebcb2ef-79317761&mc_cid=71b92a154e&mc_eid=af06e08ff7