Noel Whittaker helps ‘constrained' retirees organise their finances

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The case study presented here describes a possible scenario for members of YourLifeChoices’ ‘constrained’ tribe, that is homeowners receiving a full or part Age Pension who spend at least $43,800 as a couple or $24,200 as a single.

My responses are indicative of what may happen in the future and a guide to possible strategies. Retirees should closely examine their affairs at least once a year to ensure that their investment strategies are on track and their estate planning is up to date.

Retirees also face the juggling act of having part of their assets in growth, where volatility is the norm, while keeping enough cash on hand for at least three or four years of planned expenditure.

I am happy with assuming returns of around seven per cent for superannuation, but members must understand that this is a long-term average. For example, a fund may return 12 per cent one year and two per cent the next.

YourLifeChoices members should make themselves familiar with the calculators on my website, They are simple to use and great for modelling possible outcomes.

For example, the Retirement Drawdown Calculator lets you model your retirement drawdowns and the Compound Interest Calculator allows the user to work out the growth of his or her assets.

The Stock Market Calculator allows users to enter a notional sum, invested on a starting date of their choice, and find out what they would have had on a given closing date if the investment they chose matches the All Ordinaries Accumulation Index that includes income and growth.


Many retirees are concerned about low rates on term deposits, but it’s important to understand that if the term is short, the rate does not have a big impact.


Case study 
Constrained Couple (homeowners on an Age Pension)
Joan and Brian

Ages: 72 and 74

Retirement Affordability Index estimated expenditure: $43,818

Couple’s estimated expenditure: $48,500

Mortgage: Nil

Superannuation: $322,000 (combined)

Shares: $12,500

Cash: $80,000 term deposit (1.5 per cent interest)

Wages: Nil

Age Pension: $33,500 (combined)


Q. Joan and Brian
We thought we were living within our means, but we are spending about $48,500 per year. We are earning very little on our term deposit and are worried that we can’t sustain this for much longer. How do we better arrange our affairs? Would an annuity work as we think it is now part of the assets test? Can you help us to understand how long before we will consume all our capital? Is there anything we should be doing to maximise our income and stretch our savings?

Noel says: Joan and Brian are currently assessed under the assets test because their total assets are $434,000 if we add $20,000 as the value of assets such as cars and furniture.

Pensioners should note carefully that for assets test purposes, items such as furniture and cars are not valued at replacement value but at garage sale value. This puts a limit of around $5000 on most people’s furniture, while cars should be valued as if they were being sold for cash to the local car dealer.

I assume Joan and Brian’s superannuation will be in pension mode, which means they are required to make minimum annual withdrawals. The requirement is currently five per cent of the balance, but this will rise to six per cent of the balance when they are aged between 75 and 79. This makes the annual drawings from super $16,100 a year. Add in the $33,500 Age Pension and the total income should be about $49,600 a year. This means that they should not need to draw from their savings to balance the budget.

If we then run the numbers on their superannuation, using an earning rate of seven per cent per annum, we can see that at the end of five years, the balance should be about $354,000.

At the end of five years, their shares should be worth around $19,000 if they have left them untouched and have reinvested all dividends. They will also receive a small cash bonus from the refund of franking credits.

I don’t believe an annuity is an appropriate choice because they would be locking in today’s low rates of return for the rest of their lives. In any event, they can create their own annuity by simply drawing down on their superannuation.

It’s important they ensure that this superannuation is in one of the better-performing funds. The rate of return, and the fees, are the two major factors that determine how long their superannuation will last.

It is important that they take good advice to ensure they are optimising the returns from investments, and advising Centrelink if and when their balances reduce, because every $10,000 reduction in assets is worth an extra $15 a week in Age Pension. They should also make sure that they have non-financial assets such as furniture and motor vehicles valued as low as possible.

Next week, Noel helps a ‘cash-strapped’ retiree.

Noel Whittaker
 is the author of Making Money Made Simple and numerous other books on personal finance.

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Disclaimer: All content in the Retirement Affordability Index™ 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.

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Total Comments: 8
  1. 0

    I believe Noel Whittakers calculators are excellent and I often use them to see just where we are and where we will be later this yr when my wife becomes eligible and where we will be when I become eligible in three yrs time.

  2. 0

    These articles are good and I do feel concern for people overall, and particularly legitimate pensioners. However if you are a self funded retiree, knowing the feeling that you can always put a meal on the table, and the projected life time of zero inclusion and permanent exclusion from any recognition or financial assistance or recognition, is mentally alienating.

    Not rich. Just self sufficient. And also subject to limited returns on holdings associated with interest rates, when the history of paying off your own house was subject to interest rates of around 7% to 13%, and peaking at 19% to 21%.

    For example if you exceed assets and or income limitations by say up to 20%, and are subsequently and resultantly, a for lifetime taxation contributor then the mental alienation is difficult to avoid. The financial situation of those people is self inflicted because they worked ALL their life until retirement and focussed and took care of self sufficiency upon retirement.

    I have an entitlement to an Opal Card. Nothing else.

    I am not being greedy. The harder aspect to confront is Social exclusion or recognition, although the meaning of recognition can be misrepresented. As a white man, (although married), the exclusion, and deliberate alienation through identity division, exacerbates the Social feelings.

    Can we please look after and include everyone. Adhere to ‘non identity’ principals. And apply whether retirement age or not.

    • 0

      A universal pension would help everyone I feel and those that have set some aside should be a lot better off than those that haven’t even if they do have to pay a bit of extra tax.
      All the Phd economists are saying the same thing , but is bully boy Morrison taking any notice whatsoever—— I doubt it painted with the same brush as bully boy Trump.

    • 0

      “almost a grey”. Well Earl Grey thanks for the inclusion comment.

      What I do wish to emphasise is the overall mental impact. Say, for example, still doing a tax return up to 90+ years of age or more, and having to pay someone. No recognition that you have made your Social contribution. And on the much broader OVERALL scale it is part of identity politics. Furthermore as I say, it is a parallel, inclusion, and also mentally impacting broader process Governing our Society via identity politics.

      It is equally mentally impacting that gender decides most of our principles, ALL, and i repeat ALL, of our Governing principles put white males on their own, and ALL other identities are at the overriding forefront. Particularly women are at the forefront of ALL considerations. Say for example education and employment (formal quotas or just underwritten preference for women is the underlying principal in all Federal, State and Local Government appointments). Merit is irrelevant.

      And i will add that if domination of education (and employment appointments and advancement)were gender reversed) then there would be an enquiry, to match the education framework adjustments of the 1980s to favour females, Check the resultant 62% domination of entry level to University and graduation by women, compared to the measly 38% male entry and graduation apportionment.

      The broader matter is reward effort, be it pension or other, and get away from Social identity, leading to creation of detrimental mental impact. Retirement income as per the article, and gender preference (make that white male exclusion/detriment) are two of the most prominent mental Social misnomers that disgust me.

      Excuse me3 but I have difficulty handling ALIENation.

    • 0

      No doubt alienation is a difficult emotion to deal but I wonder which groups you feel you need to be a member of so you feel sufficiently included and recognised to reduce your feelings of alienation? How would financial assistance for “self-funded retirees” improve your sense of inclusion? I think a lifetime of knowing you had the resources and wherewithal to put a meal on the table, keep a roof over your head and resilience to cope with unexpected would be a comfort to most retirees, including white male self funded types.

    • 0

      Around me are a lot of people aged 65 and older. You look out of place as a SFR as they have a different topic of conversation and cannot follow the gist of the Pension Card holders. He wanted to talk about tax forms and share holders returns and franking credits and he just met blank looks. I understood him fully, I did work for financial papers many years ago. He felt alienated, everybody started calling him “moneybags”.
      Give everybody the full pension and take it back in taxation if the person has more than the taxation threshold. At least everybody has the concession age card and does not have to feel excluded by his circle of friends.

    • 0

      Can i just say Farside. I do not feel that I should need to be a member of any group or identity. I do not wish to be identified in character for being in a group. I do not need it. My skin and gender however does put me in the group identified for abuse as the underclass identity in Australia’s present day Society.

      I will emphasise that my dedication in my working time was NOT for myself or career recognition, but for my family. Children in particular.

      I am now sick of the ‘identity’ conveniences by every other, identity of convenience named in that manner’ to seek special or preferential treatment. The leading identity convenience is the women/female identity. which has zero conscience in degrading white males as a means in some aspects for sadism, while the other aspect is preferential victim treatment.

      Back to pension arrangements I sympathise with genuine pensioner claimants. There are people receiving pensions who are undeserved to that pension. If the non deserved groups were not treated asnon deserved, the genuine pensioners would be better serviced.

      My broader reference is that Government initiatives cannot avoid satisfying victim mentality non deservants who identify as deserving assistance in for example pensions. Some are well off with and do not deserve pensions. But as with the prime Social identity victim group of women, if you can flog claims of discrimination, no matter how distorted those claims are, you as an identified ‘diversity’ fragment, will receive special treatment.

      Comprehension of what I have said does not include “improve your sense of inclusion’. it is a parallel with other Social initiatives based on the excusable terminology of ‘diversity’.

      What i am saying in a broader sense is Government initiatives based on identity groups and misuse of the word ‘diversity’, needs to be shelved. That is because we presently have a group upon whom, make that female hatred and satisfaction of female sadism,
      denigration and dismantling is a regular practice. Even entertainment.

      I will close by wishing genuine pensioners a wonderful continuance.

  3. 0

    many years ago I used whittakers firm for advice and started a super contribution. Some years later I joined qsuper thru my employer( qld govt). So I rolled my super that was at the time $12000. It cost me $5000 in fees to do so , so yes be careful which fund you join and read the fine print



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