With changes to the asset test hitting 330,000 Australian pensioners from 1 January 2017, there’s never been a better time to consider alternative forms of retirement income.
Once again, property investment is proving its worth as a smart way to generate future-proofed income, build wealth and provide housing for Australia’s burgeoning population.
If you’re worried about a potentially dwindling income in your retirement, property investment offers a guaranteed income stream which isn’t dependent on means testing and fluctuating pension policies.
It also provides investment assets which can be handed down within your family, helping the next generation get a foot on the housing ladder.
From 1 January this year, the maximum amount of assets you can own to qualify for a full Government pension was increased for homeowners, non-homeowners, singles and couples, according to ABC News.
While this allows a larger pool of people to receive a full pension, the asset threshold to qualify for a partial pension has been significantly reduced.
A single homeowner has had the previous partial-pension threshold of $793,750 reduced to $542,500 and a homeowning couple has seen their previous cap of $1,178,500 reduced to $816,000 under the new pension laws.
More stringent asset tests apply for singles and couples who don’t own their own home. Singles have had their partial-pension threshold reduced from $945,250 to $742,500 with couples facing a drop from $1,330,000 to $1,016,000.
Harsher penalties for exceeding the asset cap have also been brought in. For every $1,000 of assets held above the limit, pension entitlement will be reduced by $3 per fortnight – instead of $1.50 as previously applied.
Under these changes, more than 330,000 age pensioners will have their entitlements reduced with at least 100,000 of those affected losing the age pension altogether, according to the independent Super Guide.
Access the Centrelink pension changes calculator to see how the pension changes 2017 will affect your retirement income.
The Super Guide also points out that the Government based their calculations for the new pension test on projected age pension rates as of 1 January 2017.
Because the rates have proved to be lower than anticipated, it seems likely that far more people than initially thought are being affected by the pension changes.
Home-owning couples were originally told that they would lose their age pension at the asset threshold of $823,000. Under the new rules, their pension cuts out at $816,000, the Super Guide says.
This squeeze on assessable assets is encouraging Australians to reduce their level of wealth rather than look for ways to increase it, according to the ABC.
Instead of actively seeking ways to build capital assets which also generate an income stream, people are restricting their investments and curtailing their lifestyles to ensure they qualify for an age pension.
This is likely to have negative effects not only on personal wealth and security but on the nation’s longer-term housing markets and debt levels. Older Australians may:
As well as leading people into unsustainable lifestyles and spiralling debt, inter-generational debt is increasingly likely to be passed down through estates.
If pensioners stay in larger, more expensive housing rather than downsizing, supply of homes in the wider market will shrink – causing upward pressure on property prices and squeezing those on lower incomes out of the property market.
If this all seems rather grim, don’t despair. Property investment is a great way of building assets which provide income for life, including throughout your retirement.
No other form of investment offers such a tangible range of benefits, including:
Quite simply, everyone needs a house or apartment to live in. Especially in Australia, where an expanding population is estimated at 24,321,189, according to the Australian Bureau of Statistics Population Clock on 6 January 2017.
Government figures show an overall total population increase of one person every 89 seconds one minute and 24 seconds.
In view of these figures, property investment which sets you and your family up for life can also be highly beneficial for the country and economy as a whole.
If you haven’t invested in property yet, don’t worry – you haven’t missed the boat. There’s value in property, no matter when you take the plunge.
Property was, and still is the leading asset class for Australian investors. Why? Because:
Simply book a How to Succeed with Property Investing meeting where we sit down, assess your situation and work out the best property investment strategy to suit your circumstances.
This is a prime opportunity to discuss how to transform your first property into a multi-property investment portfolio which future proofs your wealth and secures an income stream for life, retirement and beyond.
We show you how to:
So don’t stress about the vagaries of pension changes. Australia offers plenty of opportunities for smart property investment - and you can start any time
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A carefully built investment property portfolio can provide alternative income which will long outlast you – ensuring your family’s financial security in decades to come.