Your Book Is WRONG, Barefoot! Pulp It Immediately!
Hi Barefoot,
I’m sorry to say this but your book is WRONG.
In the chapter on retirement -- “The Donald Bradman Retirement Strategy: Why You Don’t Need $1 Million to Retire” -- you state:
“You can’t retire until you have $250,000 in super for couples of $170,000 for singles. What’s so special about these numbers? This is the maximum dollar amount of assets (excluding your family home) that you can have and still get close to the maximum age pension.”
WRONG!
According to the Centrelink website, you can have $375,000 for a homeowner couple and $250,000 for a single homeowner, and still qualify for the FULL age pension.
You will need to PULP your bestselling book!
Doug
Hi Doug,
Thanks for the all-cap! I’m not wrong.
Centrelink applies two tests for the age pension: an asset test and an income test. Then they base your pension payment on whichever test gives the lower figure.
If you were a couple and had $375,000 in financial assets, you wouldn’t actually get the full age pension -- because you’d fail the income test.
Stay with me here, and I’ll explain why.Centrelink ‘deems’ a rate of return that retirees get from their assets. If you’re a couple, the first $81,600 of your combined assets (other than the family home) are deemed to earn an income of 1.75 per cent per annum, and any amount over that is deemed to earn an income of 3.25 per cent per annum.
If you do the sums you’ll find that a couple with $375,000 worth of assets would be deemed to have earned an income of $10,963.50 per year from their assets.
Now let’s look at the income test.
Retired couples can earn a maximum of $292 a fortnight ($7,592 per annum) in income before their age pension is affected. For every dollar they earn over that, their age pension is reduced by 50 cents in the dollar.
Do the sums again and you’ll see that if a couple has $375,000 in assets, then their age pension will be reduced by $1,685.75. Only on (roughly) $250,000 would the pension not be affected, like I say in my book.
To be clear, the figures in my book take into account both the asset and the income test -- but I didn’t want to bore anyone to death (though for you I’ve made an exception). The truth is that financial planners, banks and other financial floggers scare the hell out of people when they say you need $1 million to retire comfortably. It’s complete self-serving rubbish (the more assets you have, the more fees they can grab).
Only about 1 per cent of people have super balances over $1 million. I’m writing for the 99 per cent, showing them that they can retire with dignity if they have a paid-off home, have $250,000 in combined super, and work a day or so a week.
Scott
