I want to double my annual income in retirement. How do I do it? (2024)

I am aged 75 and plan to retire in 12 months from part-time work as a consultant psychologist earning $40,000 a year, which I split with my wife through a company structure. I have $10,000 in super, and I draw a part-age pension of $19,000 a year. My wife is 65 and has $400,000 in super and a similar amount in a Challenger annuity paying $6000 a year, so our income will be about $35,000 annually after I retire. We have no other investments. How do we structure our finances to give us $60,000-$70,000 in annual retirement income, and what options, if any, do we have when my wife reaches pension age in 2024?

The assets test upper limit for the age pension is $915,500 for a homeowner couple. This will be indexed up another four or five times before your wife turns 67, so you should qualify for a part-pension.

Your simplest approach to maintain your income would be to either work for another two years – if your health allows it – or withdraw $25,000 to $35,000 a year from your wife’s super once you have retired.

You don’t mention whether your wife’s Challenger annuity is a simple-term annuity (much like a term deposit but generally paying a higher interest rate) or a lifetime product.

Your wife might consider a lifetime annuity, since those that offer lump-sum withdrawals that reduce over time (i.e. a “declining capital access schedule” in the jargon) are treated kindly by Centrelink, in that the income test assesses only 60 per cent of payments while the assets test counts 60 per cent of the purchase price until age 85 (or five years minimum), after which it counts half of that.

Lifetime annuities are offered by Challenger and AIA and both provide detailed information online. Generation Life has just introduced one, but details are only available through financial advisers.

I am aged 58, earning about $95,000 a year and have $780,000 in an MLC superannuation fund. I’m likely to work to 65, or longer, unless our finances allow earlier retirement. My partner is 67, with $200,000 in UniSuper, doing some casual work for about $18,000 a year, but this is likely to reduce. Our home is valued at about $3.5 million with a $400,000 mortgage and $230,000 in offset accounts, leaving $170,000 actually owing. Our monthly mortgage payment is $1840 and the interest rate is 3.24 per cent. We have no other investments. Should we access my partner’s super and pay off the mortgage, keeping some money in the offset in case of emergency? Or are we better off leaving the money in the super fund? Does he qualify for any of the Centrelink/pension benefits at age 67?

With your repayments of $22,080 a year, the mortgage will be paid off in less than nine years, and you would have paid about $25,000 in interest. But if the average interest rate turns out to be 5 per cent, it will take 9.5 years, and you would have paid some $43,000 in interest.

Generally, I prefer that people set themselves the twin targets of paying off a home mortgage and saving for retirement. But, as you can see, the longer the mortgage takes, the more interest you pay – and this could be saved, provided you discipline your spending. Loose cash seems to disappear willy-nilly.

So, if you both agree, withdraw $170,000 from your partner’s super and put it into the loan account. You might even transfer $229,000 from the offset into your loan account, making it more difficult to spend. If an emergency arises, use a redraw facility.

Then use the old mortgage repayments to top up your employer’s 10.5 per cent compulsory super contributions of $9975 to the maximum $27,500 by salary sacrificing $17,525. Ask your HR department to ensure you don’t go into excess if you earn a raise, bonus, or overtime throughout the year.

Your $17,525 is equivalent to some $11,480 after 34.5 per cent tax, which means you are still saving ($22,080-$11,480=) $10,600 a year, which you could place into your partner’s super without claiming a deduction.

If your partner can be defined as a spouse, you could also split your own contributions by having your super fund transfer the after 15 per cent tax amount (i.e. 85 per cent of $27,500, or $23,375 a year) into his super fund. It would take him a little over seven years to rebuild his super.

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As long as your combined salaries are more than $86,154 a year, neither of you qualifies for an age pension. Keep working!

When my father died, his share of the family home automatically went to my mother. My sister is the other name on the tenants in common title. My mother wants to give me my father’s share, making all three of us equal owners. The home was never tenanted and is valued at about $8 million. What kind of tax will we have to pay if we decide to sell? Will the sale affect my mother’s aged pension? We want to avoid capital gains tax (CGT).

The basic rules are simple. Your home, or your share of it, is free of CGT. If, after death, a beneficiary continues to live in the home, it remains exempt. If you or your sister do not live in the home, your share will be subject to CGT, if sold.

The age pension ignores your mother’s home but, if she gives it away, she will lose her pension. If she sells the house for $8 million, she won’t need an age pension.

Talk to a tax accountant. There’s a lot of money involved, and you should seek some financial help.

• Advice given in this article is general in nature and is not intended to influence readers’ decisions about investing or financial products. They should always seek their own professional advice that takes into account their own personal circ*mstances before making any financial decisions.

If you have a question for George Cochrane, send it to Personal Investment, PO Box 3001, Tamarama, NSW, 2026. All letters answered. Help lines: Australian Financial Complaints Authority, 1800 931 678; Centrelink pensions 13 23 00.