Centrelink Strategies

Centrelink can be a complex area to navigate, particularly when you may have other investments. Rich River Wealth have many years experience with Centrelink Strategies and can assist you to review your options.

Rich River Wealth will work with you to review your retirement planning and how to maximise your income in retirement including through any Centrelink benefits.

Annuities and Funeral Bonds can often form a part of these strategies.

What our clients say

“As a widow with a terminal illness I required advice about my Centrelink options. From the very first phone call to Michael at Rich River Wealth I felt a weight lift.
Rich River Wealth helped me with my Centrelink and optimized my situation. Expert advice and knowledge, quality service and all round great people to deal with.
Highly recommend.”

Deb (57 years old)

Case Study – Retirement Planning & Centrelink Strategies

A 65 year old couple approached us to help with their upcoming retirement. Although they had a good amount of assets, because they had much of their investments in term deposits, we explained the 0.5% interest rate wouldn’t be enough to cover their goal of having $45,000 p.a. to live off each year.

Their money was projected to run out at age 75, and from that point on they would be relying on Centrelink with only $36,000 p.a. to live off each year.

After discussing their options, it was agreed to increase the risk of their assets slightly, in order to get a better return than the existing 0.5% interest on their term deposits. By increasing the returns to 1.5% income per annum, we were able to project that they would meet their goal of having $45,000 p.a. to live off until age 90 (an extra 15 years of their desired income).

The Centrelink strategies involved renovating their kitchen which was well overdue and investing $27,000 into Funeral Bonds, which improved their Centrelink Age Pension entitlements by $81 per fortnight or $2,106 p.a. This represents an almost risk-free rate of return of 7.8% on their money.

HOW WE HELPED

  • Review of retirement income

  • Review of investment options

  • Centrelink strategies

Annuities

An annuity, also known as a lifetime or fixed-term pension, gives you a guaranteed income for a number of years. Or the rest of your life.

An annuity is less flexible than an account-based pension, but you can be sure about your future income.

How an Annuity affects the Age Pension

An annuity forms part of the income and assets tests to determine your eligibility for the Age Pension.

A Financial Planner can help you work out how an annuity will affect your Age Pension entitlement.

The difference between an Annuity and an Account Based Pension

Share market performance doesn’t affect annuity returns. This makes an annuity one of the more stable retiree investment options.

With an account-based pension, your money is invested in a range of investments, including shares, property and bonds. This gives potential for better growth and investment performance. Share market performance does affect returns, making an account-based pension riskier than an annuity.

Pros and cons of an Annuity

Pros

  • A regular guaranteed income regardless of how share markets perform.
  • Suitable for someone who doesn’t want to bear investment risk.
  • An annuity bought with super money is tax-free from age 60.
  • An indexed annuity protects you from the rising cost of living.
  • Payments from a lifetime annuity will last as long as you do.
  • If you nominate a reversionary beneficiary, a spouse or dependent will receive some income if you die.
  • If you choose a fixed-term guarantee period, your estate gets some money if you die during that time.

Cons

  • You cannot choose how your money is invested.
  • Income payments will be low if the annuity starts in a period with low interest rates.
  • You can’t change the amount you receive in income once payments start.
  • You lock your money away until the term of the annuity ends.
  • You cannot withdraw your money as a lump sum.

How Rich River Wealth can help:

  • Conduct a complete review of your financial situation

  • Recommend strategies to meet your retirement lifestyle goals.

  • Work with you to develop a new budget and investment plan to achieve your short-term and long term goals

  • Review and recommend wealth protection plans

  • Help you create or update your will

Funeral Bonds

Funeral Bonds are a simple financial solution to meet future funeral expenses. Investors have the choice in the underlying investment options to invest in either the Capital Guaranteed or diversified (unitised) Investment options.

A real benefit of forward planning this way is to alleviate or remove the financial burden and stress on loved ones at the time of the Investor’s passing. An investment in a Funeral Bond may also assist Investor/s eligibility for a higher rate of Centrelink/DVA pension (due to the Federal Government’s classification of a Funeral Bond as an investment.)

Tax Benefits

Growth earnings of the Funeral Bond are internally taxed at a maximum of 30% and the earnings do not form part of annual (assessable) taxable income.

Pension Benefits

Currently an individual investor can contribute up to $13,500* in a Funeral Bond and this amount is exempt from the age pension Income Test, Assets Test and deeming provisions. This may result in an increase of up to $1,053 in extra pension for an individual or for couples (double that amount) and a total increase of up to $2,106 when separate policies are taken out. To qualify, there are certain Centrelink conditions, so get advice from your Financial Planner.
*(indexed annually by Government)

Additional advantages of using the Funeral Bond

If peace of mind is important to the Investor, then the advantage of choosing the Capital Guaranteed investment option is that the guarantee ensures the monies invested are protected from any market fluctuations over time

There are no restrictions on applying due to the age or health of the Investor

No contribution limitations, although the amount of the investment should not exceed future anticipated funeral costs

Individual or joint ownership is permitted

Regular savings plans are available

The Funeral Bond is a tax paid investment – so there is nothing to report to the ATO whilst invested (if lodging an annual tax return)

There is no requirement to nominate a Funeral Director when setting up a policy.

How Rich River Wealth can help:

  • Conduct a complete review of your financial situation

  • Recommend strategies to meet your retirement lifestyle goals.

  • Work with you to develop a new budget and investment plan to achieve your short-term and long term goals

  • Review and recommend wealth protection plans

  • Help you create or update your will

Rich River Wealth – Echuca Financial Planner

Contact Rich River Wealth today to book a chat and get you on the right track to grow your wealth!

  • 0400 33 66 44

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