The Importance of Having Multiple Sources of Income during Retirement

By Darren Moffatt

December 20, 2017


Research from global wealth and retirement consultant Mercer shows that more than 60% of retirees face a looming crisis of running out of money before they die. Most Australian seniors only have enough savings to last 14 years beyond retirement and may outlive their savings by five years.

So if you don’t have enough savings for your retirement, there’s a high chance that you will find it hard to make ends meet once you stop working. One way to live a comfortable retirement is to obtain multiple sources of income, which will not only sustain your daily expenses but also protect you from different financial risks.

Below are possible income sources that you can establish during retirement:

Income from Super

Superannuation is a primary source of retirement income. One major advantage of super is that you may pay less tax than if you choose to invest your money outside super. There is also no limit on how long you can keep your money in your super fund, and you can access it anytime during retirement. The disadvantage of super is that it is locked away until you are between age 55 and 60.

But take note that several changes on super tax concessions and contributions were implemented on 1 July 2017, which you can read all the details by visiting the website of the Australian Tax Office (ATO).

When it is time to access your super, you can take the money as a lump sum or draw down as a regular income.

Age Pension

Another form of retirement income that you can receive is the pension from the government. Most Australian seniors are now depending on age pension as their primary source of retirement income.

The amount of pension you can receive largely depend on how much income you are receiving from other sources as well as the value of your assets.

[ Related Post:  Age Pension Qualification Age Changes Next Year ]

There are several types of pensions that you may receive depending on your individual circumstances such as:

  • Age pensions
  • Bereavement allowances
  • Carer payments and allowances
  • Disability support
  • Sickness and mobility allowances
  • Widow B pensions
  • Wife pensions

You can learn more about each type of pension including your eligibilities by visiting the Department of Human Services’ Guide to Australian Government payments.

Income from Investments

Aside from superannuation, there are also numerous investment opportunities that you can add to your portfolio to diversify your income. You need to make sure that your money will last for around 20 years or more so it is ideal to find investments that can outpace the inflation rate in Australia.

Common investment vehicles ideal for retirees include equities, investment properties, term deposits, and managed funds.

You must think carefully about your investment strategy, because there is always the risk of losing your retirement income. You can manage the risk by diversifying your investments and be sure to get professional financial advice before you even put your money into any investment vehicle.

Salary from Part-Time Employment

Even during retirement, many Australian seniors are willing to work past age 65. Many are using the opportunity to still get into part-time employment as a way to ease into full retirement.

Some retirees also choose to work part-time as a way to still earn income and continue to grow their super. While other seniors who are not yet qualified to receive age pension can have the opportunity to semi-retire and still receive some income.

In particular, women retirees usually benefit from working past retirement age. Because of lower incomes and career breaks, many Australian women don’t have enough super to sustain a comfortable lifestyle during retirement.

Income from Home Equity or Reverse Mortgage

If you are already 60 years old, you own your home, and need additional income, you can unlock the equity of your home and convert it into lump sum cash or income stream.

This is usually a recommended product for retirees who have already paid off their mortgages and need cash for their expenses such as aged care, debt consolidation, home renovation, and more.

[Related Post: Reverse Mortgages in Australia, Seniors First Video ]

Those who are qualified for a reverse mortgage can take advantage of the following:

  • Access to cash for your needs
  • Tax-free funds with no limits on where you spend the money
  • Flexible repayment scheme
  • No income qualifications

But despite of these benefits, stricter regulations in Australia requires lenders and brokers to be more responsible in offering reverse mortgages. Hence, not everyone can just take this loan.

In general, retirees who are willing to decrease the proceeds from the sale of their property by the loan amount plus interest charges are ideal candidates. These are usually retirees who want to stay in their homes until they pass away. Retirees who are also looking to decrease their taxable estates may also be ideal candidates for reverse mortgages.

To help you learn more about reverse mortgage, you can download our FREE REVERSE MORTGAGE GUIDE.

You can also call Seniors First Finance at 1300 745 745 or post your comments below.



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