THE suggestion from the federal government the pension age could rise to 70 is most likely a fear campaign and there are options for those who choose not to work past 65 says financial planner Rusell Tym.
The Moneylink Financial Planning advisor believes federal treasurer Joe Hockey is following in the footsteps of former prime minister Paul Keating and “scaring the daylights” out of people ahead of the budget, so that when tough decisions are made they will not appear as bad as they could have been.
Mr Hockey says Australia has no choice but to make tough decisions in the May federal budget, giving his clearest signal yet the pension age will rise to 70.
Mr Tym said since the inception of compulsory superannuation people did not have to work until the pension age and could retire comfortably if they took some sound financial advice.
“Suppose a couple who are retiring, I would suggest, to be comfortable, they would need about $ 1 million in investments,” he said.
“They could draw off 5 per cent, which would be $50,000 per year, provided they had no debt and no dependants and anything less than that then you would be eligible for the pension or a part pension.”
Now, people aged 65 or older are eligible for the aged pension or part of it, depending on their income.
In 2023, the eligibility age rises to 67.
In the meantime, the government suggested it may consider tightening the assets test so that only the most needy seniors could access the payment.
The family home was exempt from the test and Mr Tym said he predicted it would stay that way because if the government included houses over $2 million, it would impact “half of Sydney”.
He said there was no specific amount people should salary sacrifice in order to retire early because it depended on far too many variables.
But he believed anything less than $1 million in investments would be difficult to live off, especially with the Reserve Bank interest rate at 2.5 per cent.