ASSESSING RETIREMENT OPTIONS
I have just retired at age 57. My total retirement benefit will automatically be rolled over into my fund's retained benefit section with the $235,000 in the defined portion going into the cash option and the additional $240,000 benefit into the balanced option. My wife and I have around $1 million outside super, and at present we can get at least 5 per cent interest. Our top tax rate would be 20.5 per cent (nearly all our income this year will be from interest), giving us a minimum of 3.975 per cent net. Should I withdraw money from super in order to get a better return? My wife, 60 and retired, has $235,000 in a super account. By the time she reaches age-pension age, if we have upgraded our house for the future and been able to change from naturally thrifty to spendthrift, our assets may have been eroded sufficiently to make her eligible for a small age pension. As there will be a four-year period when my super would be excluded from the assets test, will the fact that I have retired make it assessable for age-pension purposes? Also, I have shares in BlueScope and Qantas, neither paying dividends. Any suggestions what to do with them? E.B.
I am generally loathe to withdraw money from super even though there may be more attractive interest rates in taxable non-super accounts. If you shop around, there are some reasonable term deposit rates being paid within super funds.
I also feel with $1.8 million in savings, you are looking towards a fairly comfortable retirement, though not a profligate one. If you splurge on renovations and convert to being a spendthrift, you may obtain a small age pension, the September assets test limit for couples being $1.05 million.
Of course, it will have been indexed up by the time you reach your age pension age of 66 but there are few benefits you can get with an age pension that you cannot get with a Commonwealth Seniors Health Card. It is pointless to needlessly reduce your assets in order to get a small pension, the fringe benefits from which are generally costed at about $2000 a year.
No money in super is counted by Centrelink's means tests until you reach age pension age, even if you are retired.
Both your shares have fallen dramatically in value, though both have bounced a little of late. You might want to hold on because, if you sold now, (a) you may not get enough cash to buy another parcel of shares and (b) if their prices then recover further, and Qantas's may yet do so if it can cut its losses, then this apparently represents one of the more pained feelings for investors.
If you have a question for George Cochrane, send it to Personal Investment, PO Box 3001, Tamarama, NSW, 2026. Help lines: Financial Ombudsman, 1300 780 808 pensions, 13 23 00.