Case study: Boosting retirement income with downsizer contributions

Downsizer webinar

Learn about downsizer super contributions in detail in our webinar, including how the eligibility rules work, plus timing, Centrelink and strategy considerations.

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• Lee (67) is retired with a current super balance of $250,000.
• Lee’s wife Mandy (66), also retired, has a current super balance of $150,000.
• They receive the full Age Pension from Centrelink – currently $38,709 per year – and withdraw the minimum super pension (5% of their account balance based on their age) from their super accounts, which is $20,000 per year combined.
• They want to know whether their super will run out soon if they continue withdrawing the minimum amount, leaving them completely reliant on the Age Pension. They also want to know if they have the capacity to increase their retirement income.

Lee and Mandy are currently spending all their annual retirement income of $58,709 ($38,709 in Age Pension and $20,000 super pension combined) on household expenses and small domestic trips. They had thought they could afford more and feel their income is not enough. They also want to travel internationally for a few years.

According to the Association of Superannuation Funds of Australia’s (ASFA’s) Retirement Standard, a couple around the age of 65 needs approximately $42,621 to live a modest lifestyle and $65,445 to live a comfortable lifestyle. Using this benchmark, Lee and Mandy feel they will need income of at least $62,000 a year to give them the freedom to travel overseas.

They have the following assets:

• Primary residence: $900,000 (4 bedroom – bought when they were 40)
• Home contents: $10,000
• Cars: $10,000
• Cash savings: $5,000
• Total superannuation: $400,000

It’s important for them to continue receiving their current income to support their basic expenses. If they withdraw extra from super to fund their travels, they’re afraid their super will run out quickly, making them rely on Age Pension.

Using MoneySmart’s Retirement Planner calculator, they discover that if they want to make their super last till at least Lee is 90, the most they can withdraw is approximately $20,349 per year. This is only slightly more than the $20,000 a year they currently withdraw.

Initial estimated annual retirement income until age 90

Source: MoneySmart Retirement Planner