Online at http://www.financialcareservices.com.au/newsletters/vol-4-ed-2/

FINANCIAL CARE SERVICES
Independent aged care, lifestyle and financial advice for seniors
Volume 4 Edition 2 –28 February 2014

Hello

When retirees still have debt

Was your New Year resolution to save money, to pay off your personal debt and not spend more than your income?
Perhaps you have been using redraws on your home mortgage to finance your lifestyle in the expectation that you could clear that debt with a lump sum from your superannuation on retirement.

But sadly there is a real risk that you might leave the workforce sooner than you had planned and possibly long before your superannuation had grown larger than your accumulated debt.

The Disability Support Pension (DSP) and Age Pension provide for a frugal lifestyle for people who are unable to work 15 hours per week on account of physical, mental or psychiatric disability, or old age.

The minimum Pension Age for the Age Pension is 65 years for people born before July 1952. If you were born after June 1952 then you will be older before you qualify for your Age Pension. Read more about the increasing Age Pension Age 

Your lifestyle could be very constrained if your only income were the DSP or Age Pension and you were still paying off personal debts. Remember the financial means tests for Centrelink income support benefits such as the Age Pension and DSP, are based on the financial assets that you have. Any amounts that you owe cannot be offset against your assets. Read more about Centrelink Pensioners Personal Debt

But what would you do if you had to early retire from full-time work but were not incapacitated enough to qualify for DSP and not old enough for the Age Pension?

Maybe you could claim NewStart which is paid at a lower rate than DSP and subject to more stringent means testing.

Alas, selling the home might need to be considered if you cannot afford the mortgage repayments and there is no big lump sum coming soon. Selling the family home and moving to a smaller one level home might be essential if you are permanently incapacitated for stair climbing.

But if you could not safely move yourself about within your own home then you might have to move into residential aged care.  Centrelink would allow you to offset your personal debt including your home mortgage loan, against your other assets for determining your net asset value on entry to residential aged care.

Moving into residential aged care is a sad option for younger people who could not be adequately cared for at home. Read more about Personal debt on entry to aged care 

Now maybe the time to actually follow through on your New Year resolution and get your discretionary spending under control.

Financial counsellors offer guidance and mentoring to people who struggle to reduce their expenses.

Your current superannuation account balance could be sufficient to pay out your home mortgage loan and your other personal debts. But what would remain to finance your family’s lifestyle if you were incapacitated?

While you are thinking about your ‘essential expenses’, could be the time to assess your insurance needs. You insure the car and the house contents but are you insured against losing your capacity to earn a good income?

Christine at Financial Care Services engages with clients approaching retirement to plan their retirement finances.

Call Christine on 03 9808 0338 to book an appointment to discuss your long term planning for when you no longer earn an income from work.

If you would like further confidential, independent and professional advice about Centrelink, lifestyle or financial advice, please contact Christine Hopper (03) 9808 0338.

____________________________________________________

Christine Hopper

Director
Financial Care Services Pty Ltd
Independent aged care, lifestyle and financial advice for seniors in Melbourne, Victoria, Australia
Australian Financial Services Licence Number
299570 (check this at www.search.asic.gov.au/fsr/flb.html)
Authorised Representative Number
252529 (check this at www.search.asic.gov.au/fsr/far.html)

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Disclaimer: The information contained in this newsletter is of a general nature only and does not constitute “financial advice”. You should obtain your own personal financial advice before investing any money or moving in to any retirement village, lifestyle community or aged care facility. Financial Care Services is licensed to provide financial advice to individual clients based on their personal situations.

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