If you’ve heard friends or family members discussing their plans to reassess their finances to ensure they receive the full age pension, you’re not alone.
Many Australians share this as their ultimate goal. However, it’s best to stop aspiring to get an age pension and consider whether this will align with your long-term lifestyle goals. The comfortable, fulfilling lifestyle you’re accustomed to may not be sustainable at that rate.
At First Financial, we provide tailored planning services to help you achieve your dream retirement. While optimising age pension benefits is a common objective, prioritising the full pension by giving away assets over building wealth might not be the best strategy. Here’s why.
Why the age pension will fall short of your expectations
The maximum age pension payment for couples in Australia is just over $41,000 annually, which falls significantly short of what the average middle- to higher-income earner is accustomed to spending on their lifestyle each year.
To qualify for the full age pension, a couple’s combined assets outside their family home must be less than $470,000. This includes super, investments, savings, and other personal assets. For high-income earners who have accumulated more wealth, trying to get an age pension can be restrictive and force a significant downsizing of assets—ultimately undermining the financial security needed for a comfortable retirement.
In contrast, building wealth beyond relying on the age pension allows for greater financial freedom. By growing your assets through investments, superannuation, and other strategies, you can maintain a comfortable lifestyle throughout retirement without being restricted by pension asset limits.
The implications of gifting assets
Assets can’t simply be gifted to qualify for the age pension. Strict gifting rules limit how much can be transferred or given away without affecting eligibility.
Any assets gifted above $10,000 annually (or $30,000 over five years) continue to count towards the asset test for five years.
Even if you plan ahead and give away assets five years in advance to bypass these rules, the age pension alone is unlikely to generate the income you’re accustomed to. With your assets gone, you may find yourself financially constrained in retirement.
Relying solely on pension payments not only limits your ability to travel and enjoy planned luxuries but also leaves you vulnerable to unexpected expenses such as home repairs or healthcare costs. Without sufficient assets, maintaining both your lifestyle and financial stability becomes increasingly difficult.
Building wealth for a more secure retirement
Many high-income couples spend upwards of $100,000 annually to maintain their retirement lifestyle, with travel dreams or other retirement goals adding significantly to these costs. A sustainable financial plan is key to ensuring your finances can support this level of spending throughout your golden years.
Rather than giving away assets to qualify for the age pension, use the time before retirement to build your wealth. For those with the means, aiming for a well-constructed investment portfolio can provide the flexibility and security needed to enjoy the lifestyle you envision without compromise.
To support this, consider how superannuation, savings and diverse investments work together to grow wealth.
Super offers long-term potential, while savings provide liquidity, and investments such as property or shares can create opportunities for steady returns. By using these tools wisely, you can build a retirement strategy tailored to your goals.
Each person’s retirement situation is different, and that’s why we always recommend seeking professional advice from a financial adviser to help you make informed decisions.
Utilising alternative benefits
Partially and fully self-funded retirees can often access a range of benefits, including the Commonwealth Seniors Health Card, which offers discounts on prescription medications, medical services and utilities.
This card is income-tested but has no asset test, making it more accessible.
Such options allow retirees to access similar discounts and benefits as those on a full age pension, like reduced healthcare and utility costs, without needing to deplete or give away assets.
This allows you to maintain financial independence while still receiving essential concessions.
Talk to the retirement planning experts
Australia’s age pension is a crucial safety net for seniors who, for various reasons, haven’t had the opportunity to secure their financial future.
However, for those who can build their own resources, relying on the pension may not offer the freedom or lifestyle they’ve worked hard to achieve.
At First Financial, our experienced advisers can help you create a retirement plan that’s better than relying on a full age pension from the moment you end your career.
We can assist you in building the resources needed to achieve your dreams and live financially free.
To learn more about retirement planning, the age pension or to get started on the pathway to wealth today, contact our team today.
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