Making the Most of Your Money in Your 70s
Your 70s can be one of the most rewarding stages of retirement. After decades of working, saving and planning, the focus often shifts from building wealth to making the most of what you have.
That does not mean abandoning your budget or spending without a plan. Instead, it can mean using your money to enjoy life while keeping your finances organised and prepared for the future.
There are also important financial considerations during this decade. Government entitlements can change, some superannuation opportunities become more limited, and planning for aged care and your estate becomes increasingly important.
Here are four areas worth reviewing.
1. Review Your Government Entitlements
Receiving the Age Pension or other government concessions should not necessarily be treated as “set and forget”.
Your financial position can change throughout retirement. You may spend down savings, investments may change in value, or your other circumstances may change.
Keeping Centrelink up to date with relevant changes helps ensure your entitlement reflects your current circumstances. If your assessable assets or income have fallen, your entitlement may change. Conversely, if Centrelink has not been updated where required, you could receive more than you are entitled to and potentially have to repay it later.
It can also be worth checking your eligibility even if you did not qualify for the Age Pension when you first reached pension age. Someone above the relevant limits at the time may qualify later because their circumstances or government thresholds have changed.
The Commonwealth Seniors Health Card is another concession worth investigating. Unlike the Age Pension, it does not have an assets test, although an income test and other eligibility requirements apply.
The key is to review your entitlements periodically rather than assuming an earlier assessment still applies.
2. Make Your Retirement Income Fit Your Lifestyle
If you have an account-based pension, you generally need to withdraw a minimum amount each financial year. For example, the standard minimum annual payment percentage is 5% for people aged 65 to 74 and increases at older ages.
Importantly, this is a minimum withdrawal requirement, not a recommendation for how much you should spend.
For many people, their 70s remain active years. Travel, hobbies, home improvements and spending time with family may be priorities. Depending on your financial position, you may decide that enjoying some of your retirement savings now is important to you.
Many retirees find it difficult to move from decades of saving to spending their savings. A retirement plan can help assess how much income and capital may be required over time, taking into account unexpected expenses and possible future healthcare or aged care costs.
It can be useful to review your pension payments and spending regularly. Inflation can gradually reduce purchasing power, meaning an income that comfortably funded your lifestyle several years ago may no longer do so.
The objective is to balance enjoying retirement today with maintaining financial security for the future.
3. Simplify Your Finances and Review Your Super Opportunities
Financial simplicity can become increasingly valuable as you get older.
Over a lifetime, it is easy to accumulate multiple bank accounts, small shareholdings and investments across different institutions. Each creates another account to monitor and asset that somebody may eventually need to administer on your behalf.
Consider whether every account and investment still serves a useful purpose. Simplifying does not necessarily mean putting everything in one place. The aim is to remove unnecessary complexity while retaining a system that works for you.
Your 70s are also an important time to understand whether you have remaining opportunities to contribute to superannuation.
Age 75 is an important milestone. Subject to the contribution type and other eligibility rules, super funds can generally accept certain voluntary contributions up to 28 days after the end of the month in which you turn 75. If you are aged 67 to 75 and intend to claim a tax deduction for a personal super contribution, a work test or work-test exemption also generally applies.
A recontribution strategy may also be something to discuss with a suitably qualified financial adviser. Broadly, this can involve withdrawing eligible super benefits and recontributing amounts to super, subject to eligibility, contribution caps and other rules. In some circumstances, this can alter the tax components of a super balance, which may affect the tax treatment of future death benefits paid to certain beneficiaries. Whether this is appropriate depends on individual circumstances.
Downsizer contributions are another potential opportunity. If you meet the eligibility requirements, you may be able to contribute up to $300,000 per person to super in connection with the sale of an eligible home. There is no maximum age for an eligible downsizer contribution, although other conditions apply.
Superannuation and tax rules can be complex and timing matters, so consider obtaining professional advice before taking action.
4. Protect Your Future and Plan Your Legacy
Financial planning in your 70s is about more than investments. It can also involve making future decisions easier for you and your family.
Aged care is a good example. Planning ahead gives you time to think about where and how you would prefer to receive care, understand the support available and consider how future costs might be funded.
Estate planning deserves similar attention. Having a current will is important, but other arrangements may also be relevant. Depending on your circumstances and the laws in your state or territory, these could include powers of attorney, guardianship arrangements, advance care planning and superannuation death benefit nominations.
It is also worth thinking about what “legacy” means to you. Leaving an inheritance is one option, but some people choose to give during their lifetime, such as helping adult children, contributing to grandchildren’s education or paying for a family experience.
Before making substantial gifts, consider your own future income and capital requirements, as well as possible implications for tax, social security entitlements and future healthcare or aged care costs.
Making Your 70s Count
The common theme is being intentional with your money.
Keep relevant Centrelink information current. Review your retirement income and spending rather than treating the minimum pension payment as a spending target. Simplify unnecessary financial complexity. Consider whether superannuation opportunities remain available before relevant age limits pass. Make sure your estate and aged care arrangements continue to reflect your wishes.
Retirement planning is not simply about making money last. It is about using your resources thoughtfully to support your security, lifestyle, relationships and experiences.
Important information: Government benefits, Centrelink thresholds, superannuation contribution limits, pension minimums, tax rules and aged care arrangements can change. Check current information with Services Australia, the Australian Taxation Office and other relevant authorities, or seek professional advice before making financial decisions.
The information in this article is general in nature and does not take into account your personal objectives, financial situation or needs. It does not constitute personal financial advice. Consider whether the information is appropriate for your circumstances and seek professional financial advice where required. Where a financial product is being considered, review the relevant Product Disclosure Statement and Target Market Determination, where applicable, before making a decision.