Quickest way to boost retirement savings
RETIREES Diane and Buzz Cowie recently decided to offload their family home to free up some cash and pump up their retirement pots.
The Gold Coast grandparents sold the five-bedroom family home they had owned for more than three decades, moving into a two-bedroom apartment in Surfers Paradise they had previously purchased.
“It was our 10-year plan – we have always been careful spenders, we have never splurged and we have always set aside for a comfortable retirement,” said Mr Cowie, 70.
Mrs Cowie, 66, said downsizing prompted her to tidy up her retirement savings. “I had a few super accounts that needed consolidating and topping up, and it was an good opportunity for us,” she said. “It was a big deal to do this.” The self-funded retirees said the upkeep of their previous property was becoming too arduous and was among the key drivers to downsize.
On July 1 last year the Federal Government introduced a downsizing incentive that allows Australians aged 65 or over to use the proceeds from the sale of one home, up to $300,000, to be tipped into super and not count towards other contribution caps.
Australian Taxation Office figures show, since the measure was rolled out, more than 5500 Australians have used it, totalling $1.2 billion – an average of $218,000 each.
Industry Super Australia’s chief executive officer, Bernie Dean, said the downsizing rule was a good option for older Australians “who are rattling around in a big house”. “There’s a really good offer for them to make some extra cash on the side as they are downsizing,” he said. “They can kill two birds with one stone: they can downsize and boost their nest egg.”
The value of a family home does not count towards the pension means tests, but if owners do decide to sell, the proceeds can affect their pension eligibility.
Queensland-based super fund QSuper’s data found 320 members made a downsizing contribution to their super. Its calculations found a 65-year-old throwing in an additional $220,000 would be able to draw an extra tax-free income of $15,000 per year until age 88, based on an average earnings rate of 6 per cent.
QSuper’s financial arm QInvest’s chief, Kim Hughes, said Australians should “plan carefully” before going down the downsizer path.
“There’s great information on the ASIC and ATO websites, and super funds can certainly help,” she said.
A trusted financial planner will also be a great source of information.
“We have an ageing population who have benefited from the property boom and they are needing to convert their assets into something that is more liquid and that they can draw down a pension from,” Ms Hughes said.