The Old Age Pension. The Wealth Through Property Series

It’s mind-boggling to hear how many Australians are still relying on the pension to get by after retirement age. The pension used to be an acceptable option, especially if you owned your own home. You could live in your mortgage-free home and use the pension to cover your day-to-day expenses and then downsize and spend the extra cash on bigger expenses. It worked for a lot of Australians.

However, the old age pension isn’t what it used to be. As of the September 2022 increase, the pension is $1,026.50 per fortnight or $513.25 per week (approximately $26,689 per year) for a single pensioner.

Imagine going from a job that pays you $100,000 per year to just $26,689. Could you do it?

The pension hasn’t gone up with living costs and pensioners struggle to make ends meet at the best of times. And it’s not going to get any better. The best-case scenario for a pensioner is that they will be able to cover their few expenses with $513.50 per week – food, bills, and so on. But what if you have more than a few expenses? What is the likelihood of you getting sick at some point in your future, close to or after retirement age? What would you do?

Let us tell you a story about my Daimien’s mum: She was late to property investing, and started in her early fifties with her first property. She wasn’t a great investor and not overly strategic, she just bought properties when she could. In the space of about 10 years, she ended up acquiring around 5 properties. It was a very good thing that she did invest when she did, because in her sixties, she got very ill and needed to fund her own care.

Here in Australia, we do have a pretty good public healthcare system compared to most places, but the coverage it offers is limited and you can’t really rely on it to provide for everything, as she found out. She needed to fund her own care from those five properties, which had a net worth of about a million dollars. By the time she passed away, she had about $100,000 remaining. Can you imagine how things might have looked if she hadn’t had the value of those investment properties? Imagine if she’d been reliant on the public healthcare system and aged pension. She wouldn’t have been able to get the kind of care she really needed, at a time when it mattered the most.

Now, cross your fingers and toes so that you don’t get sick and that you get to enjoy a long, healthy retirement and live off the income from your properties for a long while. But just in case the worst happens, it’s also good to know that you have the net worth sitting there, available if you need it. You do not need to rely on the pension or public health system. You do not need to worry about whether or not the government will take care of you. (Newsflash: it won’t!) Please don’t think that it won’t happen to you. It might not, but it’s best to be prepared for what might happen. It’s best to assume that you can’t survive on $513.50 per week or the
equivalent at the time you retire.

Stay tuned for more daily insights from Daimien in Wealth Through Property.

~Integrity Team
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