The age pension will increase, and the value of assets people can hold in retirement while still qualifying for the pension will lift in the next round of indexation changes, which will take effect on 20 September.
Age pensioners will receive an extra $28.10 per fortnight for singles and $42.40 per fortnight for couples under the changes.
This will raise the pension to $1,144.40 per fortnight for singles and $862.60 per partner for couples.
Australians become eligible for the age pension when they reach their 'retirement age'. For people born on or after 1 January 1957, that's 67 years old.
The age pension is subject to assets and income tests. If you own too much or earn too much, you may only qualify for a part-pension or no pension at all.
As part of the indexation changes, how much you can own in assets and earn in income is going up, too.
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How much can you own in retirement and still get the pension?
Australians in retirement will be able to own a higher value of assets from 20 September and still qualify for the pension. This is helpful given many Australians have extra investments outside superannuation.
The value of your home is not included in the assets test for the pension. However, Australians in retirement who do not own a home are allowed to own more in assets and still be eligible for the pension.
Assessable assets include your superannuation, ASX shares, international shares, bonds, managed funds, investment properties, and cash in savings accounts.
For a full pension, single homeowners will be able to own $314,000 in assets from 20 September. Single non-homeowners will be able to own $566,000 in assets.
Couple homeowners will be able to own $470,000 in assets outside their home. Couple non-homeowners will be able to own $722,000 in assets.
For a part-pension, the new cut-off point for single homeowners will be assets of $695,500, and for single non-homeowners it will be $947,500.
The cut-off for couple homeowners will be $1,045,500, and for non-homeowners, it will be $1,297,500 in assets.
How much can you earn and still get an age pension?
The age pension is also subject to an income test.
From 20 September, single pensioners will be able to earn $212 per fortnight and couples $372 combined per fortnight while still qualifying for the full pension.
For a part-pension, the new cut-off point for single pensioners will be $2,500.80 per fortnight, and for couples, it will be $3,822.40 per fortnight.
Personal finance guru Noel Whittaker provides this handy age pension calculator. It allows you to enter the value of your assets and your income to determine how much you can expect to receive in a pension.
How much money do you need for a comfortable retirement?
According to the ASFA Retirement Standard, couples need $690,000 in superannuation, and singles need $595,000 by retirement age, plus a part-pension, to have a comfortable retirement lifestyle.
The Association of Super Funds of Australia (ASFA) defines a comfortable lifestyle as money for life's essentials plus private health insurance, exercise and leisure activities, occasional restaurant meals, a domestic holiday every year and an overseas trip every seven years.
ASFA estimates that a comfortable lifestyle costs $73,337 per year for couples and $52,085 for singles.
ASFA's estimates assume you own your own home without a mortgage. They also assume that you draw down all your superannuation capital and invest it with a 6% return per annum.
Foolish takeaway
The Motley Fool has a comprehensive retirement planning guide to help Australians save and invest for their retirement.
