A Retiree Couple with a Holiday House and No Age Pension Entitlement Were Running Out of Money in Retirement
Background: Meet Christine and Michael
Christine and Michael, both 77 and retired, sought our guidance because their current finances were running low, and without action, they risked having insufficient funds for the year ahead.
Their assets included $57,126 in cash and super, which they knew would not be enough to continue to provide for them, but they also owned their primary residence in the suburbs of Melbourne’s North and a holiday home in Barwon Heads worth a combined value of approx. $1,600,000.
The holiday home held deep sentimental value for the family but prevented them from accessing any Centrelink benefits. The couple had also decided that their current home, with its stairs, would not be suitable long term, and they were determined to downsize when the time was right.
Key Results at a Glance
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Increased Age Pension:Est. $16,500 Age Pension, compared to $0 on current plan
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Improved lifestyle and comfort:Living in home worth $1m v $650K on current plan
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Comparable long-term position:Maintained an equivalent estate value at age 90 despite the lifestyle upgrade.
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Tax free growth:Using Downsizer contribution to super to invest tax-free.
Why Did They Seek Advice?
- Determine how long their assets could support their lifestyle and ensure they would not run out of money.
- Explore options to provide ongoing financial security past their current age of 77.
- Understand the potential impact of their property holdings, including their holiday home, on income and Centrelink eligibility.
Strategies Implemented
Lucas and Charlotte’s retirement plan involved several interconnected elements, from property and superannuation to debt management. To give them confidence in their retirement decisions, we modelled different scenarios and structured strategies that balanced their financial security with lifestyle goals.
Property Wind Down Advice:
- Our projections showed that selling the Barwon Heads holiday property was necessary to provide Christine and Michael with the funds they needed to support their lifestyle throughout retirement.
- The property was inherited shortly after capital gains tax was introduced in 1985, meaning the sale would result in a significant capital gains tax liability.
- Despite this, our analysis confirmed that selling the property was the best long-term option and would comfortably fund their income needs for the rest of their lives.
- After selling the property and accounting for tax implications, they would become eligible for the Centrelink Age Pension, estimated at $4,700 per year.
- In this scenario, keeping their primary residence or one of equivalent value, they were projected to have $865,172 in financial assets and $1,982,362 in total assets by age 90.
- Since their current home was not suitable for ageing in place, we also reviewed options for selling and buying a new home that better fit their needs.
- The couple also sought advice regarding their primary residence, which they felt was not suitable for ageing in place.
- While their initial plan was to downsize, we modelled additional options to upsize by $50,000 and $250,000 to show how property value changes could improve Age Pension eligibility and lifestyle outcomes.
Age Pension Advice:
- The Centrelink impact of different home purchase values was a central part of our modelling.
- Scenario 1 - Purchasing a new home for $800,000 (an upsizing of $50,000): They would have fewer assessable assets, improving their Age Pension eligibility.
- Estimated benefit: $8,200 per year in Age Pension payments.
- Projected assets by age 90: $807,768 in financial assets and $1,964,166 in total assets.
- Scenario 2 - We projected the couple’s financial situation over the next 13 years if they were to purchase a property worth $1,000,000 and sell their current residence.
- Estimated benefit: $16,500 per year in estimated Age Pension entitlements.
- Projected assets by age 90: $670,143 financial and $2,111,694 total assets.
- Scenario 3 - we assessed the option of selling their current primary residence and buying a $600,000 home, which would make them ineligible for Centrelink.
- Benefit: leaving them with more financial assets upfront ($944,488 financial, $1,815,735 total assets).
- After reviewing the options, they decided on Scenario 3, which aligned most effectively with their values and retirement goals.
- The sale of the Barwon Heads property would not only improve financial security but also allow Christine and Michael to update their older vehicle and fund personal lifestyle goals.
Superannuation & Investment Advice:
- We overlaid each of these property choices with advice on the Downsizer Contribution to Super, and we projected that the below contributions would help ensure they have a comfortable income stream well into the remainder of their retirement.
- This allowed them to maximise their retirement income while taking advantage of the tax benefits.
- Additional funds beyond $5,000 held in cash were recommended to be invested via our Managed Discretionary Account (MDA) for long-term growth and stability.
Outcomes and Benefits
- The sale of the Barwon Heads property provided sufficient funds to meet their lifestyle needs well into retirement.
- Proper asset structuring unlocked Age Pension benefits of $4,700–$16,500 annually, depending on their chosen property scenario.
- Multiple projections allowed the couple to choose a home that met their personal and lifestyle goals without compromising financial stability.
- Total assets projected between $1.82M–$2.11M and financial assets between $670K–$944K by age 90, ensuring a comfortable income stream.
- Downsizer Contribution and careful timing of property sales reduced unnecessary taxes and maximised retirement income.
- Maintained lifestyle freedom by making property decisions based on personal choice rather than financial pressure.
Key Takeaway
Christine and Michael’s journey shows how tailored financial advice can uncover opportunities you might not have realised existed. With the right strategy, they were able to transform a potentially uncertain retirement into one that offered lasting financial security, access to Age Pension benefits, and the freedom to enjoy the lifestyle they value most. It’s a reminder that the right guidance can turn complex financial decisions into a clear path toward confidence and peace of mind in retirement.
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Important Note
Produced with our client’s permission. Names within this case study have been changed to protect the client’s right to privacy. The content of this case study has been based on a real-life client. Any information provided here is general advice only and does not consider your objectives, financial situation or needs. This information should not be taken as comprehensive and does not constitute legal or financial advice. You should seek legal, financial or other professional advice before relying on any content. Yield Financial Planning is not responsible to you or anyone else for any loss suffered in connection with the use of this information. Information is only current at the date initially published.
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