Finishing up working life with a cool $1 million in assets?
You're well ahead of the game, according to Australia's Retirement Standard.
The Standard is Australia's benchmark budgeting tool for retirement.
It was created by the Association of Superannuation Funds of Australia (ASFA) in 2004 and is updated quarterly for inflation.
ASFA provides some guidelines on how to afford a modest and comfortable retirement.
For a comfortable retirement, ASFA recommends couples strive to save $730,000 in superannuation.
If you don't have that much in super, you might have a collection of investable assets that add up to a combined $730,000.
Either way, you're in a great position to afford a comfortable lifestyle.
And guess what?
Even with $1 million in assets, couples are still eligible for the age pension.
We'll show you how and why next.
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$1 million in assets and you can still get the pension
The full pension, including supplements, is $933 per partner per fortnight, or $1,866 combined for couples.
Australians born on or after 1 January 1957 are eligible for the pension from 67 years of age.
The pension is means-tested via an assets and income test.
Different monetary thresholds apply to each test, depending on whether you own your own home.
Your assets and income need to be below the thresholds in order for you to qualify for the payment.
Assets test
The assets test incorporates almost everything you own, except your home.
So, we're talking ASX shares, bonds, rental properties, cash savings, cars, and home contents such as furniture.
Under the rules, homeowner couples with assets worth between $499,001 and $1,121,000 qualify for a part-pension.
Non-homeowner couples who have between $766,001 and $1,388,000 in assets also qualify for a part-payment.
Now let's do the income test.
Income test
In our example today, let's assume your $1 million in assets includes $100,000 for a car and home contents.
Those assets are non-financial assets, and do not form part of the income test.
Let's assume the $900,000 balance sits in savings accounts and superannuation.
Instead of having to report your savings interest and superannuation dividends every year, Centrelink uses deeming to work out an assumed level of annual income from your $900,000 in financial assets.
The lower deeming rate for the first $110,600 worth of assets for couples is a highly conservative 1.75%.
Income above these amounts is deemed to have earned 3.75%.
These deeming rates are very generous compared to the official cash rate, which rose to 4.85% on Tuesday.
The less income you are deemed to earn, the more pension you are entitled to receive, you see.
So, on $900,000, your deemed income is $1,213 per fortnight ($31,538 annual) as a couple.
Under the rules, couples receiving between $397 and $4,128 in fortnightly income qualify for a part-payment.
How much will you get?
Centrelink will apply whichever test entitles you to the least amount of social security.
Here are the results.
Couple homeowners
Under the assets test, your pension entitlement is $181.50 per partner, per fortnight, or $363 combined.
Under the income test, your entitlement is $728.75 per partner, per fortnight, or $1,457.50 combined.
So, you'd receive $181.50 per partner, per fortnight, or $363 combined.
Couple non-homeowners
Under the assets test, your entitlement is $582 per partner, per fortnight, or $1,164 combined.
Under the income test, your entitlement is $728.75 per partner, per fortnight, or $1,457.50 combined.
So, you'd receive $582 per partner, per fortnight, or $1,164 combined.
