‘I don’t have $500,000 or more in super saved. Am I doomed?’

Hearing what sum some experts believe is required to create a decent retirement income can be scary, but Nick Bruining is an expert in creating the best possible combination of super income and the Age Pension and he has some comforting info for soon-to-be retirees, including this Starts at 60 reader. You can read more of his insights on the issue in the latest update of his book Don’t Panic! More Reasons You Don’t Need $1 Million to Retire Well. 

Q: I want plain, simple information on using super after retirement. Many seminars speak of people needing a minimum of $500,000 or more to survive so, for those of us who don’t have or never will have that amount, are we doomed? Should I live on the Age Pension only and leave what super I have in the accumulation account? Or should I turn it into a monthly super pension, and if I do, how will that affect my Centrelink pension?

Don’t feel alone. Most of us have much less than the suggested ‘target’ of at least $500,000. These seminars are designed to spook you into investing more – usually through the seminar provider so they can collect fees or commissions. The reality is that a debt free, home owning couple can generate an income of more than $48,000 per year, tax free and using a pretty safe investment strategy.

What spruikers conveniently fail to tell you is that with $250,000 in total super and savings, you’ll qualify for close to a full Age Pension of around $36,000 a year. Using an account passed pension and drawing the legal minimum of 5 percent on that $250,000, the age pension will be topped up by $12,500. Bingo! That’s $48,500 and before we even weigh in with the considerable discounts attached to the pension concession card.

If you have more than $250,000, then that’s great news as you have plenty of money to make choices about when to stop work, what sort of holidays you can take etc. More money means you might get less Age Pension. The point is, we need to understand how investments, super, tax and Centrelink all work together hand-in-glove to produce realistic and workable results.

If you have a question for Starts at 60’s money experts, email it to [email protected].