The cost of retirement in Australia continues to rise and I have noticed increased cost pressure on retirees everyday expenses.

I am often asked the question “how much do we need to save for retirement?” There is no simple answer to this question as everyone has different living standards and one could go without what you might consider essential.

According to the Association of Superannuation Funds of Australia, to live a comfortable retirement at age 65 a couple will need $640,000 saved or funds of $62,562 per year. For a couple aged around 85, the funds needed per year falls to $58,871.

Some older Australians who are homeowners that I have spoken to feel anxious about their retirement and being able to meet their income needs. Being asset rich and cash flow poor is not an unusual dilemma.

One option to consider is downsizing your family home.

Selling the family home may allow eligible individuals to make a downsizer contribution from the capital proceeds into their superannuation of up to $300,000. A couple can contribute up to $600,000.

A downsizer contribution is not treated as a non-concessional contribution and will not count towards an individual’s contribution caps.

Eligibility criteria

  • Homeowners aged 65 years or over. The 2021-22 budget proposed reducing the eligibility age down to 60.
  • Owned an Australian property for at least 10 years and it must be your primary residence within this period to qualify for the capital gains tax exemption.
    • A houseboat, caravan or mobile home are not included.
  • Must not have previously made a downsizer contribution using the proceeds from the sale of another home.
  • The contribution must be made within 90 days of when the change of ownership occurs.
  • You must provide your superannuation fund with the downsizer contribution into super form.

There is no requirement to purchase another home, for example, you may rent or go into aged care.

Things you should consider

  • Age Pension implication
    • Currently, your primary residence is exempt as an asset from assessment of entitlement to the Age Pension. Your superannuation is assessed and the downsizer contribution may affect your Age Pension entitlement.
  • Contributing to a self-managed super fund.
    • It is essential for trustees or members of a self-managed super fund to ensure that a downsizer contribution into the fund is permitted by the trust deed.

This is just one option older Australian’s have to top up their super for a more comfortable retirement.

Please note this article provides general advice only and has not taken your personal, business or financial circumstances into consideration. If you would like more tailored advice, please contact us today.