Decide what kind of life you want, then worry about the pension

Pensioner Henry is thinking of selling an expensive property

Q

I am 80 years old and live in Melbourne with my wife, in an expensive piece of real estate. I am contemplating selling.

If I do sell, what would be the best way to then organise my life? I am an age pensioner – could this affect my pension?

Should I buy shares or invest in superannuation? What would be the best outcome?

Yes, Henry, it would definitely impact your pension if you sold a valuable home and did not buy another one. As you know, our age pension system does not count our home as an asset. If you sell, the money will not count as an asset for 12 months, providing you intend to buy another home. You will also have “deemed income” calculated on the proceeds.

This is all a bit tricky. If you sell, your “intention” to buy another home is very important. If you do not do so, the whole amount of the sale price will be treated as an asset.

But the most important thing is what do you want to do? If you want to stay where you are, but would like more lifestyle money, please talk to the pension people. The Pension Loan Scheme can pay you up to 150% of your pension. This may be preferable to a reverse mortgage if you want to stay in your home, but with more income.

If you are moving for lifestyle reasons, maybe to a regional area, and the sale proceeds are a lot more than the cost of a new home, that is just fine. Yes, you may lose all your pension, but if you have a large pot invested, you are likely to have much income from investments.

It does upset me when people value their pension more than how they want to live.

I get really cranky when I hear from people deliberately wasting money just to get a few more pension dollars. That really is madness.

What I would like you to do, Henry, is to decide what is best for you. When you do that, go along and chat to the aged pension people to work out your options before you take any action.

From 40 years of experience, though, I do know that the best decisions are not made by tax or pension considerations. Set your own personal goals, then move on to pensions, tax and investments.