Make the most of your assets to improve your lifestyle

Consider tapping into your super and the home equity scheme

You are not alone here, Jan and Alec. The cost of living is hurting all of us, but those on fixed income, such as a pension, are most impacted.

What I would like you to do is to give AustralianSuper a call. Our big, low-cost funds such as AustralianSuper have done a really good job for their investors. Sure, I get cranky with them from time to time about annoying things, such as a lack of transparency around the investments they hold for members. I also would like to get more details about their expenses. This seems to sit in a file called “top secret”.

But as it is a super fund, it will not pay you dividends or distributions unless you request them. At your age you are entitled to take out some or, if you want, all of your money. But I really would not encourage this unless it is absolutely necessary.

The average earnings rate from big super funds in their balanced option, which you are in, has been excellent. AustralianSuper can give you the advice you need about this, but it has been earning around 8%pa for decades, so for you to draw out 4% or 5% would not have much impact on your capital, even after inflation. I imagine that an additional $6000 a year, tax free, would make a huge difference to your lives.

Next, check out Services Australia’s Home Equity Access Scheme. You could be eligible to receive up to 150% of your full pension.

Now, you are likely, as are most of us, to have a conniption about the idea of a reverse mortgage.

But let’s have a think about this. You have a valuable home, which history tells us will increase in value over time. Even after you start to receive payments from AustralianSuper, you may still find that an extra amount really helps.

Let’s say $1000 a month would make a big difference to your lives. As the home equity scheme is not private-sector operated, the money advanced to you is only, at the moment, charged at an interest rate of 3.9%. So, after a year, based on my example, you would have drawn $12,000, with about $480 in interest added, so your debt is around $12,480.

Think about how much your house’s value has increased over the years. I don’t know about your place, but I’ll go with around the average price of a home in Australia, let’s say $500,000.

So, if $12,480 is drawn against this average house, it needs to increase in value by about 2.2% to “match” the amount you draw.

I have no doubt you have worked hard to pay off your house and car and build savings and now you find it hard to make ends meet. You do not have to be like that.

My advice is to have a chat to your fund and get some money flowing to you from your super. Take a good look at the government’s Home Equity Access Scheme, plan how much extra you need and use these two resources to enjoy your lifestyle.