Volume 7 Edition 11 Financial Care Services Newsletter
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Financial Care Services Newsletter by Christine Hopper
Independent aged care, retirement lifestyle and financial advice for seniors
Volume 7 Edition 11 – 30 November 2017
Releasing equity by downsizing your home
Active retirement is portrayed as a time for extended travel and leisure activities. Living the active retirement lifestyle requires more cash than just the full Age Pension. Remember, last month we looked at how the Age Pension alone funds a frugal lifestyle for a single homeowner or a modest lifestyle for homeowner couples. Seniors who need to rent a home in retirement often struggle financially if they have nothing in the bank.
Retired seniors can find themselves asset rich but cash poor. When your wealth consists of a house, a car and personal belongings, you might not have any discretionary spending money. But if your health is still good you want to be living the active lifestyle.
The challenge is then to access some cash to finance the active lifestyle or just cover the costs of essential home maintenance. One option is the reverse mortgage, borrowing against the home value. The interest on a reverse mortgage accumulates to be paid from the eventual sale proceeds of the home. A variation on the reverse mortgage is a partial sale of the property. You could sell ten percent of your property with settlement deferred until you move out.
But if your home is too big for your active retirement lifestyle you could downsize to a more suitable home. Hopefully you would have some cash left over to finance your retirement lifestyle. But beware, buying your new smaller home could absorb all of the proceeds of sale of your bigger but older former home.
Downsizing into a transportable manufactured home
The ultimate in downsizing your land holding is to sell your property and join the grey nomads. The hope is that once you have bought the dream home on wheels and a vehicle strong enough to tow it, you will have the health and wealth to travel Australia forever.
When you eventually tire of being on the move you can settle down to park permanently in a lifestyle retirement park for manufactured homes.
Another route to long term residence in a manufactured housing lifestyle communities is to use your superannuation benefit to buy a prefabricated home unit. Long term renters can then own a small home fully connected to essential services. Seniors can then gather in manufactured housing lifestyle communities that appear like any other retirement village lifestyle communities.
The challenge of living in these manufactured housing lifestyle communities is that the caravan park operator owns the land on which your manufactured home is established. When the site lease fees increase you have a choice; you pay the higher fee or you move your manufactured home to another permanent caravan park.
But when the owner wants to redevelop the land then you must move on. Yes, you get six months’ notice to move and take your demountable home with you. The scary part is when your manufactured home is too big to be transported or too fragile to be lifted.
Read more about seniors living in manufactured housing lifestyle communities.
Be sure to obtain independent financial advice before you or your elders downsize into transportable manufactured housing. A consultation with Christine at Financial Care Services before you sign up for a manufactured housing home could help you understand what you are buying. Spending money now on independent advice could spare you from losing your life savings later.
Call Christine now on 03 9808 0338 to make an appointment for independent retirement living advice.
Centrelink deemed interest rates
Your ‘income’ for Pension and means tested aged care fees includes your deemed financial income rather your actual financial income. Centrelink deems you to earn 1.75% per annum on the first part of your financial assets and 3.25% per annum on any additional part. Remember that at Centrelink your ‘financial assets’ includes any ‘excess gifts’ given in the last five years.
You financial assets are deemed to be earning at the deeming rates even if you are actually getting much more or less. For example, if you have owned listed shares that are paying dividends equivalent to 6% per year then be happy that Centrelink are only including the lower deemed amount in your assessable income.
Bank interest on special seniors transaction accounts
Long ago when deeming was new, the major banks offered retirement savings pensioner security accounts for seniors that were credited with the deeming rate. Back then you could park your money in a retirement savings pensioner security account where it was accessible and earning the same rate that Centrelink deemed you to be getting.
In recent times, the interest rates on home loans have dropped and the major banks are paying customers less for their money parked in term deposits. The major banks have also quietly reduced the interest rates paid on retirement savings pensioner security accounts. The retirement savings accounts are attracting interest at 1.00% or less, on the first tranche and 1.70% per annum on the additional part.
Yes, you might be compensated for having your money inaccessible for twelve months by using a term deposit paying 2.4% on maturity at the end of the year.
Scams offering very high returns
Beware, if you lend money to a business that is not a real Australian bank you might be promised a higher interest rate but at a serious cost to you. That cost could be having your money tied up in that investment for many years. Another potential cost to you is the risk of not being paid interest and/or not getting your money back.
If the interest rates offered are really high compared with the rate that the main banks are offering then maybe the offer is too good to be true. Read the Money Smart website for tips on how to avoid scams.
Maybe a lower interest rate from your usual bank would actually give you a better long term return than an exciting investment that costs your life savings.
Deemed interest rates impact your means tested Centrelink Pension
Remember that an increase in your deemed financial income could reduce your Age Pension. The deemed interest rates used at Centrelink can be changed by the Commonwealth at any time.
Financial Care Services offers Short Consultations for ‘personal financial factual information’ to help you check your financial position against the means tests for an Age Pension or Commonwealth Seniors Health Card.
You can start by emailing us for the Financial Care Services Financial Services Guide and Age Pension Data Illustration Personal Data form. You will also receive our Financial Services Guide that provides essential information about Financial Care Services.
The fee for a Short Consultation 45 minutes in person or by telephone and/or email for ‘personal financial factual information’ is $99.
Christine can also assist you with collating your personal data, estimating how much Pension or Carer Payment you could expect to receive and completing the Centrelink forms for you to sign. Normal hourly rate consultation fees apply for assistance with personal data collation, completing Centrelink forms and attendance at a Centrelink office with you.
When the seniors are no longer good financial managers
Finally if you think that your elders are no longer coping with money matters then maybe it is time for their Attorney to get involved. The Attorney could attend to money matters such as bill payments and Centrelink updates. The elders could still enjoy paying for their basic shopping with cash that the Attorney drew out for them.
Responsible seniors have already granted an Enduring Power of Attorney to a trusted person. The Attorney can then manage your financial matters when you are too frail physically and/or mentally, to cope.
If your elders, or yourselves, have not granted anyone an Enduring Power of Attorney then your family or friends will need the Court to appoint someone to manage your financial affairs when you are unable to make sound decisions. The Guardianship part of VCAT appoints and oversees Administration orders for Victorian residents who cannot handle their finances prudently.
Contact VCAT to start the application for an Administrator and/or Guardian for someone you love who cannot manage their own finances responsibly.
If a VCAT appointed Administrator is not your preferred option then appoint an Attorney now.
The next step is to consult a local lawyer now to arrange for Enduring Powers of Attorney for yourselves and your elders.
The team at Financial Care Services have each granted Enduring Powers of Attorney to other family members.
If your adviser is mature enough to have a granted an Enduring Power of Attorney then you could too.
Your feedback please
Satisfied clients are our greatest ‘advertisement’. Our clients regularly provide wonderful verbal reviews, but we also welcome written reviews and if you would like to share your thoughts, please visit our Reviews page. Please tell us and other families how Christine at Financial Care Services helped you through the challenges of aged care entry.
Other seniors want to know that you were guided through the wonders of Centrelink Pensions and retirement village or aged care entry.
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.
All eligibility for Commonwealth benefits will be determined by Centrelink or DVA, based on your personal position as documented and the legislation and Regulations in force at that time.
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