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How To Manage the Age Pension With A Younger Partner

November 20, 2023

For numerous retirees, entering the retirement phase can bring about a remarkable sense of freedom and excitement. However, some individuals encounter an unexpected challenge when managing their pension alongside a younger partner, even if they are one or two years younger!

Balancing the financial needs may initially appear daunting, but with the right approach of understanding, communication, and careful planning, it is possible to manage your retirement savings effectively.

Embracing Age Differences: The Key to Financial Empowerment in Retirement

For many couples, age is but a number, and love transcends it. Yet, when retirement planning is on the cards, an age difference, even if it’s only a year or two, can impact financial decisions. But, with the right guidance, there’s no obstacle too great. Here’s a guide to help couples with an age gap navigate the intricacies of the Centrelink age pension.

For couples with an age difference, there’s a silver lining when it comes to the age pension. If your super is in the accumulation phase (which means you can still contribute and haven’t started drawing an income), it isn’t part of Centrelink’s assets and income test for age pension purposes until you reach the pension age.

For Example: Partner 1 is 67 and ready to embrace the joys of retirement. They can apply for the age pension. However, if Partner 2 is 60 and hasn’t yet reached the qualifying age, the good news is that the assets in their super account aren’t part of the Centrelink assessment.

An astute financial decision can be transferring funds from the older spouse’s superannuation savings to the younger spouse’s super. This way, the assets assessed by Centrelink for Partner 1 can be minimised.

However, be mindful: There are limits to contributions, that can potentially be increased through use of the bring forward provisions, affecting how much you can transfer. Not every situation will benefit, but many might find this strategy increases their retirement income.

Asset Test & Income Test: Centrelink’s assessment for age pension entitlements isn’t just about how much you’ve saved. They also consider assets like investment property, bank accounts, and other financial and lifestyle assets outside your family home.
Retirement Savings & Employment Income: The combined assets, including bank account details, employment income, and retirement savings like account-based pensions, are critical for Centrelink’s assets and income test.

Superannuation Savings Held: Funds in the younger spouse’s super under the accumulation phase aren’t part of Centrelink’s assessment, potentially increasing age pension eligibility.

Financial Planning: Tailor your retirement plans based on your personal circumstances. It can ensure you receive benefits like the pensioner concession card and the Commonwealth Seniors Health Card, maximising your retirement income.

Navigating the age pension application process can seem daunting. But with a focus on your retirement years and the right knowledge, you’re better positioned to make financial decisions that align with your personal objectives. It’s essential to understand Centrelink rules, part pension entitlements, and how different assets are assessed by Centrelink and how redirecting assets to certain asset classes can increase your age pension entitlements.

We strive to empower you with the tools and resources you need. From understanding work bonus schemes to funeral bonds, we’re here every step of the way. Don’t view financial planning as a chore; see it as your path to a fulfilling retirement. Embrace each financial year with confidence, knowing you’re on track for the retirement you’ve always envisioned.

Remember, retirement isn’t just about age or money; it’s about living the dream. Your dream. And with the right guidance, financial situations, no matter how unique, can be navigated for maximum benefit.

The Age Pension Application process is notoriously difficult to navigate. Take a look at our Comprehensive Guide for step-by-step instructions. We offer a range of solutions and retirement advice.

Maximising Retirement Benefits with Super Splitting

With the strategy of Super Splitting, couples can potentially enhance their retirement income, ensuring they make the most of their golden years together.

For couples where the younger spouse, Partner 2, has some years before reaching the age pension age, Super Splitting can be a game-changer. By leveraging the ‘bring forward provisions’, Partner 1, the older spouse, can potentially transfer a significant amount – up to $330,000 – into Partner 2’s accumulation account. This manoeuvre might seem intricate, but it’s an effective way to optimise assessable assets, having a favourable impact on the assets test.

Outcome: This smart financial decision could amplify Partner 1’s age pension entitlements by as much as $12,870 per year until the younger spouse achieves the age pension age.

Once the older spouse, Partner 1, gracefully transitions into retirement and reaches pension age, there’s a shift in how Centrelink views your assets. Centrelink combines both partners’ assets (excluding the family home) to ascertain the eligibility and amount of age pension.

In Practical Terms: Partner 1 could be entitled to the maximum couple rate. This translates to approximately $826.70 (incl supplements) per fortnight, or a commendable $21, 494K annually.

But the journey doesn’t end with just the age pension. With eligibility, even if it’s a modest $1 per fortnight, Partner 1 can get a Pensioner Concession Card. These benefits can greatly enhance the financial situation, providing peace of mind and added security in retirement.

You can find more information about the Pensioner Concession Card at this link: https://www.servicesaustralia.gov.au/pensioner-concession-card.

A little knowledge, combined with strategic planning, can pave the way for a rewarding retirement. It’s not just about numbers; it’s about building a life post-retirement that matches your dreams and aspirations. By understanding and utilising tools like Super Splitting, you’re not just planning; you’re sculpting your future. Always remember that your ideal retirement is likely achievable, and with the right strategies in place, it’s closer than you think.

Decoding Superannuation: The Accumulation vs. Pension Phase

Understanding the Superannuation Dynamics

Planning for a good retirement means understanding superannuation well, especially when dealing with age pension if you have a younger spouse. Knowing more helps you make smart choices for the retirement you want.

At its core, superannuation is about more than just savings; it’s a vessel to ensure a prosperous future. During the ‘accumulation’ phase, the superannuation savings held by Partner 2 remain untouched by the assets test. This exemption allows couples to potentially enjoy a higher part age pension, boosting their income during their retirement years. You can find more information about this exemption at this link: https://guides.dss.gov.au/guide-social-security-law/4/8/2/10.

Life is a series of phases, and so is your superannuation. When the superannuation savings under Partner 2’s name move into the ‘pension phase’, the Centrelink assessment changes. These savings now become assessable under the assets test. This transition means the assets, including account based pension, will be assessed by Centrelink, which could influence the amount you receive.

Considering life expectancy in your retirement planning is crucial. Ensuring that your savings and age pension benefits are maximised as we live longer becomes essential. It’s not merely about financial security but about crafting a fulfilling and enriched life in the years to come.

Your Pathway to Empowerment

Feeling overwhelmed? Don’t be. Remember, every journey begins with a single step. And you’re not alone. If you’re navigating the nuances of managing age pension with a younger spouse, reach out to us. Together, we’ll explore your unique situation, offering insights, guidance, and tools to sculpt the retirement you’ve dreamt of. Your vision, combined with our expertise, can make retirement a period of joy, exploration, and fulfilment.

Aurora Wealth - Retirement Planning - What to expect on your first appointment

Crafting Your Ideal Retirement Journey with Aurora Wealth

In the mosaic of life, retirement stands as a testament to years of hard work, perseverance, and dreams woven along the way. It’s a phase that embodies relaxation, reflection, and the pursuit of long-held passions. Understanding how to manage a pension with a younger partner, even if they are one or two years younger, is a unique aspect of the retirement journey. While your planning journey may seem riddled with complexities, especially with age gaps and varying pension phases, understanding and embracing the intricacies can make all the difference. Knowledge, paired with strategic financial planning, can transform these golden years into a period of joy, empowerment, and endless possibilities.

With Aurora Wealth by your side, you’re equipped with a trusted partner, guiding you through every twist and turn of your financial journey. Our commitment is to empower you, illuminate your path, and assist you in crafting the retirement you’ve envisioned.

Ready to apply for the Age Pension but not sure where to start?

We’re here to do whatever we can, to make the application process as smooth and easy as possible – we can even complete the process for you. Here is what we offer:

  • A detailed document outlining your income and assets, prepared during your appointment.
  • A one-on-one meeting with a pension specialist, including a thorough explanation of how Centrelink evaluates your pension.
  • Comprehensive management of your age pension application from beginning to end.
  • We’ll register My Pension Manager as your authorized representative to manage all Centrelink correspondence for your claim.
  • We’ll ensure you are informed throughout the entire process.

We offer this service for $660* for the once-off application and/or $660* per annum for the ongoing service.

*Costs may be higher for higher complexity – such as people that have businesses, trusts and self managed superannuation funds.

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Micheal is a financial expert with over a decade of experience in the field. Growing up in countryside Victoria, and later moving to Melbourne to pursue higher education, Micheal has since then been working in the financial industry for over 13 years with much of his career spent as a financial advisor. He holds the prestigious Certified Financial Planner designation and is a registered member of the Financial Planning Association of Australia. Micheal is also a dedicated family man and proud father of 3 amazing children. When he isn’t working or spending time with his family, he enjoys outdoor activities such as hiking and camping.

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