Noel Whittaker answers your money questions

Is it worth saving for retirement or should you just spend what you have?

Hand holding piggy bank with question marks

What is and isn’t assessed when claiming an Age Pension can be confusing. Should you stop worrying and just spend what you have? Finance expert Noel Whittaker has his say.

Selling the family farm

Q. Paul
I was wondering if I sell my property (which is a farm) to my son and become the vendor financier, would the property be considered an asset or would I just be assessed on the interest received as income? Hence, I would receive a lower Age Pension, but would have pensioner benefits.

A. Once you do that you will be assessed as a non-homeowner but the loan would be treated as a deprived asset and be subject to deeming. Make sure you take advice – once farms are involved it can become complex.

Save it or spend it?

Q. Genevieve
I have had a fragmented work history, so have saved little for my retirement – just $55,000 in super and about $5000 in cash. I believe I will get an Age Pension, so is there any point in me hoarding these savings? Should I treat my self to a bucket list trip instead? Let’s face it, none of us know what’s ahead!

A. Based on the information supplied it will certainly qualify for full Age Pension – I would not be against you having some treats, as long as you keep some cash for emergencies.

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 newsletters@yourlifechoices.com.au

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    COMMENTS

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    26th Sep 2016
    10:17am
    Yep - good one Noel.

    Genevieve does not say she owns her own home - so that critical info is missing in the response about her blowing money on treats.

    Funny thing about money and your personal view on one's longevity - a female at 67 is statistically likely to live until 87 - but we take the view we won't live that long - and so we consume what little resources we have - bugger tomorrow.

    Genevieve could live for over 20 years on the pension - so she takes the risk - spend now and have fewer resources and a poorer lifestyle in the future - or eek it out over 20 years and maybe have a better lifestyle - and a more significant buffer for emergencies and home repairs if she owns one.

    Spending a small reserve is OK if you die early - possibly sad if you don't - and you likely end up whinging about the pension not being sufficient on sites like this one.
    Adrianus
    26th Sep 2016
    11:23am
    I have heard a few people say "you know you've planned well when your last cheque bounces" he he.
    My personal view is that when one considers how cash flow is produced, that is to say by labour or capital invested. There is a greater importance for the preservation of some capital as we age.
    Old Geezer
    26th Sep 2016
    11:41am
    Frank I disagree. You should crossed off your bucket list as soon as you can as you will live to regret it if you leave it until you can't.
    Anonymous
    26th Sep 2016
    12:06pm
    I agree Frank - you need to preserve some capital. Let's say you keep $10K as a buffer in this Genevieve person's case -it would give you roughly $2.5K per year more to spend over 20 years.

    That is not a huge amount - but makes the difference between a bus trip somewhere (not too far) in Australia if you are just using the pension - OR - a small OS holiday at least once every couple of years in your early retirement years - and a buffer for health issues or whatever later (or sooner).

    The biggest issue I see on this site is that people don't have the savings buffer in their pension retirement - and suffer accordingly.

    It's unfortunate - but you can't have your savings cake and eat it - it's just a sad fact of planning your life.
    Adrianus
    26th Sep 2016
    12:35pm
    Old Geezer, I'm just saying there are only two ways to make money. A person's lifestyle should be based around only 80-90% of their income throughout their life. Sadly for many of us we realise this far too late in life. Whether a retirees wealth is $10,000 or $10,000,000 the question remains the same. Why should someone with $10,000 be better off spending the lot? While the advice given to the wealthier retiree is to preserve some capital?
    I agree with Noel Whittaker and Reasons.
    However, I also agree with your view on crossing off the bucket list. The "make a wish foundation" is one organisation making a difference in that regard, where people whose lives are tragically cut short and are without means to fulfil dreams.
    I started crossing off my bucket list in my twenties. I've had a wonderful life. Done more than I thought I was capable of achieving and have just started another project.

    26th Sep 2016
    3:30pm
    The advice to Genevieve is sound and is applicable to anyone with liquid assets wanting a "treat" (and most people reading this are OLD enough to qualify for a WELL DESERVED treat, whatever it is!), and who want to receive their ENTITLEMENT to at least a "bit" of the Age Pension by spending their money to lower their assets on that treat to better qualify for your RIGHTFUL government assistance. In plain "pensioner speak", spend up to reduce your assets AND advise Centrelink (NOT Human Services, as they are now referred to, as they do not qualify for either word in most cases) of your depleted assets WHENEVER they go down so you can increase your Age Pension accordingly. Enjoy!


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