The biggest fear I hear from my retiree clients is they do not want their money to expire before they expire.
Australia has an enviable retirement safety net for their seniors. It's called the Age Pension and along with a superannuation system established in 1991 (30 years old) it ensures at least some additional funds for retirees to help with their day to day living expenses.
Some people I meet with want to access the full age pension. Others just want a part pension so they can access other benefits i.e., reduced rates, medical etc.
Regardless of retirement or not, I’ve never met anyone who wanted less income or that didn't want to increase their cashflow.
The following list is more tailored for retirees who are seeking legal ways to increase their cashflow in retirement, however some strategies are also relevant to those still working too.
10 Strategies to Increase Your Cashflow in Retirement
- Consider purchasing a lifetime annuity to lower your income and asset tests. For more information, the following link from SuperGuide as it has more general information about this strategy. https://www.superguide.com.au/in-retirement/means-test-treatment-of-lifetime-annuities-july-2019
- Consider making a personal contribution (subject to limits and accessibility) into the younger spouse’s name. This is also known as a re-contribution strategy. For more information the following link from Viden as it has more general information about this strategy https://viden.com.au/tips-and-traps-smsf-re-contribution-strategies/
- Casual or part time work- earn up to $178pfn ($4,628pa) single or $316pfn ($8,216pa) couple and still receive the full age pension. For more information, the following link from Services Australia as it has more general information regarding this strategy https://www.servicesaustralia.gov.au/individuals/services/centrelink/age-pension/who-can-get-it/income-test-pensions
- Sell your home and make a downsizer contribution into your super account. This strategy may be considered if you want to increase your super balances and as a result draw more allocated pension from your pension account. For more information, the following link from Money Magazine as it has more general information regarding this strategy https://www.moneymag.com.au/downsizing-boost-super-balance
- Invest in higher returning assets other than cash. Shares that are fully franked/ REIT’s, often distribute higher income than the interest you can earn from the cash in your bank account. However, be aware of the risks if you are considering investing in these assets i.e., not cash. Your capital will rise and fall with the market rise and fall too. You should seek professional advice regarding your gaols, objectives, situation, and risk tolerance before implementing this strategy.
- Pensioner loan scheme/ reverse mortgage may be an option to consider. Basically, homeowners who access pensioner loan schemes/reverse mortgages give up equity in their home in order to access a higher pension or lump sum i.e. they go into debt. There are obvious risks in doing this and before proceeding you should seek professional advice. For more information, the following link from Services Australia as it has more general information regarding this strategy https://www.servicesaustralia.gov.au/individuals/services/centrelink/pension-loans-scheme
- Arbitrage borrowing costs vs income earnings Very Very High Risk. This strategy requires borrowing at lower interest rate with the ‘hope” of receiving a higher income in return. Often investors invest in high yield tax friendly assets i.e., fully franked shares. If I was, to use the following analogy to describe this as a strategy it would a quote from the infamous Warren Buffett “You only find out who is swimming naked when the tide goes out.“
- Selling covered calls over your existing shares. My tip if you do not understand what options are and how they work then DON’T DO IT. This is a strategy for experienced and sophisticated investors. For more information, the following link from ASX as it has more general information regarding this strategy https://www.asx.com.au/documents/resources/options_simple_guide.pdf
- If you like to tinker, get something old, make it new and sell it for a profit. Selling your personal items (less than $20,000 pa) was previously not identified as an income by Centrelink, however the ATO has a different view. The following two links from the ABC and the ATO has more general information regarding this strategy https://www.abc.net.au/news/2013-03-19/ebay-data-helps-centrelink-catch-welfare-cheats/4582480 & https://www.ato.gov.au/business/starting-your-own-business/in-detail/online-selling---hobby-or-business-/
- Get creative with reducing expenses i.e., house swap for holidays, use discount cards & offers for seniors, review your insurances and fixed costs, live overseas in a lower cost country, access community service i.e., library/ community centre activities use credit card points for gifts/ discounted travel etc (be sure not to overspend and pay off your cc each month). The following link from CANSTAR has more general information regarding this strategy along with 70 tips https://www.canstar.com.au/savings-accounts/frugal-living-tips/
If you are stuck in a funk or you’re lost in a cloud of complexity, feel free to contact me. Most often in life we just need someone to talk things through and to lighten our load a little. The following articles may also be of help.
This post was written by Peter Horsfield, as such they are his personal views. Peter helps you to focus on what’s most important, the right strategies at the right time. To learn more about How to become Financially Independent visit Peter Horsfield Smart Advice
Peter Horsfield in an Authorised Representative and Investsure Holdings Pty Ltd ABN 16 050 286 630 as trustee for Horsfield Family Trust ABN 55 609 068 513 is a Corporate Authorised Representative of Infocus Securities Australia Pty Ltd ABN 47 097 797 049 AFSL and Australian Credit Licence No. 236523.