How to estimate when super stash will run out

Martha* asks Noel Whittaker how she can estimate when her super will run out and she needs to prepare to transition to an Age Pension.

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Q. Martha*
I am a single woman, about to turn 65, and I have been retired for two years. I downsized and bought an apartment four years ago, salary sacrificed for many years into my super and was gifted some money from a family member. I know I am better off than most with over $800,000 in super. My question is how to manage as I approach the Age Pension cut-off point.

I can see there will come a time when I will be close to pension cut-off, but how do I know when that tipping point is? And should I book a couple of holidays, replace my white goods, do major maintenance work, and so on, and then go on the pension?

I know that once I am on the pension, I will initially only draw a part-pension and will need to tighten my belt. Is there any general rule about how you make that decision?

A. The assets test cut-off point for a single person is $567,250 – you are a long way away from that point. I suggest you go to my website and have a play with my Retirement Drawdown calculator, which will let you enter your financial assets, expected rate of return and the amount of the annual withdrawals you expect to make. You can then model your own situation.

For example, if you used a starting balance of $800,000, an estimated earning rate of six per cent, and annual drawings of $70,000 a year indexed at two per cent, the calculator would tell you that your money would last for 16 years. It will also tell you it would be around seven years before you reach the asset test cut-off point, but keep in mind that what that value would be then is anybody’s guess. Remember, the ageing population is putting increasing stress on the welfare budget.

History tells us that retirees tend to spend more in the early years of their retirement than the latter years so you may well find that your money would last much longer than that. As your capital becomes reduced, you should reach a point where you would be eligible for the Age Pension – and you can work out what that would be by using the Age Pension calculator on my website.

*Martha is not her real name.

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.

Do you have a question you’d like Noel to tackle? Email us at [email protected]

Disclaimer: All content on YourLifeChoices website is of a general nature and has been prepared without taking into account your objectives, financial situation or needs. It has been prepared with due care but no guarantees are provided for the ongoing accuracy or relevance. Before making a decision based on this information, you should consider its appropriateness in regard to your own circumstances. You should seek professional advice from a financial planner, lawyer or tax agent in relation to any aspects that affect your financial and legal circumstances.

Written by Noel Whittaker

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