‘We’ve got a $150K mortgage, little income and no pension. What should we do?’

Q: I’m 63 and my husband is 64, but we won’t qualify for an Age Pension until we’re 66-and-a-half because we were both born in 1956. My husband was made redundant recently but received just three months’ salary as redundancy pay because he’d only been permanently employed at that workplace for six months.

He has $59,000 in superannuation but with little work around (we’re in a small, regional town), we’re having to use that to make our mortgage repayments and pay bills. If I’m careful, the super money will last a year.

I have no super and only work casually three days a week, earning $1,000 a month. We’ve still got $150,000 left to pay on our mortgage, with about $100,000 in equity in our home. And we can’t get Newstart because our super is classed as income.

With no access to the pension for two-and-a-half years at least, where do we go from here? We’d greatly appreciate advice on whether we’re structuring our finances in the smartest way, on how to deal with Centrelink or how to create an income from our assets.

A: I’ve put a lot of thought into how to answer your question and I’ve decided to be honest, perhaps brutally so. If you came into my office and laid out your circumstances, I’d probably make you a cup of coffee, then say something like this:

You sound like you’re looking to retire, when you should be putting all your efforts into looking for work. You say there’s little work around. I say look harder, and look elsewhere. We expect people in their  20s to travel the country looking for work, then why not older people?

That’s because the harsh truth is this: you can’t afford to retire. You don’t have ‘$100,000 equity’ in your home, you have a home with $150,000 debt that you need to repay before you can even think about retiring. You haven’t got enough super to fund anything like a decent lifestyle.

As for how to create an income from your assets, well, your biggest assets are your ability to work. If you both work full time for three or four years, you could get rid of the mortgage. A couple more years and you’d have a healthier super balance. And you’d still be under 70.

The alternative isn’t attractive, because it means you end up spending all your super just to survive, and you’ll be forced to sell your home, because there’s no way you can keep making payments on a $150,000 mortgage if your only income is the Age Pension. That’s why I like my way better.

P.S. Your super money isn’t classed as income, in fact, it’s ignored by Centrelink until you reach Age Pension age, so it appears you’ve been misinformed on that. But I don’t want you to confirm that with Centrelink, because Newstart won’t help get you on track. Both of you working full time is the answer.

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

IMPORTANT LEGAL INFO This article is of a general nature and FYI only, because it doesn’t take into account your financial or legal situation, objectives or needs. That means it’s not financial product or legal advice and shouldn’t be relied upon as if it is. Before making a financial or legal decision, you should work out if the info is appropriate for your situation and get independent, licensed financial services or legal advice.