Will downsizing impact your pension?

Some risks in life are worth taking, such as going for that skydive on your 70th birthday or making your neighbours blush by gardening in the buff (only the very brave do this in winter). However, when it comes to your pension, it pays to be conservative.

When you’re opting to downsize, it’s important to be aware of how your pension can be impacted so that you can make an educated decision about your retirement. The pension you receive is based on both an asset test and an income test. Financial investments, superannuation, business assets and vehicles such as cars, caravans and boats are all taken into consideration for the asset test. Real estate is only counted in the asset test if it’s not your principle home (which is exempt). Once you sell your home, the proceeds are seen as income.

It’s likely that as your circumstances change, so will your pension

The amount you receive from the sale of your home is exempt for a year, in which time you’ve hopefully found a new living arrangement perfect for you. If you haven’t though you can request that this period be extended another year by contacting the Department of Human Services.

It’s worth noting that from July onwards, $300,000 from the sale of your home can be channelled into your superannuation fund (for couples, you can each contribute this amount). This can also impact your pension. Conditions to this incentive apply though; you need to be aged over 65 and must have owned that property for over 10 years.

Where to get retirement and financial advice

These can be murky waters to navigate, while downsizing, with lots of different terms and conditions which seem to be changing all the time. If you find yourself getting confused, you’re not alone. It can be unsettling when you don’t know how much money you have to rely on in the future. It’s worthwhile getting in touch with a financial planner, as they’ll be able to chat with you about your options and help you with your estate planning.

A financial planner can recommend steps to take so that you can downsize with ease, minus the pension worries, and live the life you want. This should be a time of excitement and fresh energy (perhaps spent dreaming up plans of new languages to learn, places to travel to and hobbies to try out), not one of stress. Don’t waste time bogged down reading rules and regulations, so reach out for expert help.