Retirement strategy for low income 64 year old

I’m trying to help my mum before retirement. She earns about $48-50k and makes voluntary contributions of about 2.5k per annum. She plans to retire in 8 or so years, has effectively no assets except a $1m PPOR and some small amount of super. Is there any obvious things she should be doing in preparation for retirement?

She will likely have to go onto pension when she retires and is below the ~ $250k asset cap.

I think she should increase voluntary contributions to about 13k so save the ~20% in tax? Is there anything else I’m missing here?

I can also gift my mum money if she needed extra money for contributions.

 

Tax on contributions to super is 15%, your mum's paying roughly 13.5% + Medicare levy. She may be paying more tax than if she held onto it and put in an after tax contribution.

Her super fund (or other funds) will have pre-retirement seminars & she & you should attend.

A larger undeducted contributions (eg your gift) could be contributed to bolster her balance.

@Paul@PFI has posted some great examples to work with.

 

Ah good idea about the seminars, thank you!
Realized the margin tax rates start at $45k now, so analysis above definitely wrong.

 

You can't eat a 1 million dollar house. Downsize? and take advantage of the large Super contribution you can make. Giving you a smaller house and an income to live on.

Downsizing contributions into superannuation

 

The contribution counts towards pension asset test, and realistically I can fund the retirement expenses above that (holidays etc). From generational wealth perspective it
might be better the house growing tax free. Mostly she likes where she lives, maybe as she gets older, but yeh, will consider it.

 

Based on your info, your mum could quit or reduce work in 2 years and receive a pension. She could work part time to supplement the pension amount. There are numerous other benefits of having a pension card which could amount to several thousand dollars per year. (ie. reduced rates etc).

It would be well worth seeing an advisor who specialises in this area.

 

I think she will want to keep contributing till she can’t anymore so probably won’t retire yet. Her mum worked till 80 or so. Can anyone recommend a reasonable priced advisor?

 

And where Mum lives too. A $1m home in Sydney is a typical home and its probably costly to retain and maintain. Moving to a new retirement area where property is cheaper with a great lifestyle could also see her assets better utilised for a lot longer and still access a part pension., eg Moving to a area near to coast may cost $600K and leave her with a extra $20K a year to live off (tax free). Combined with the age pension that is $36K of untaxed income of $3K clear a month. Where if she retains a $1m home she may have $18K a year to live off. One way you could help and avoid her "thinking" she has lost the asset is buying half her house. Or all of it. Parents often struggle with selling on market but welcome it staying in the family. Is it suitable for a GF ?. You could build that in the yard and its her home !! She could even use the Centrelink GF concession to fund the GF herself and its a exempt asset provides she has a life tenancy And you get a rental from the house. Downsizing friom a full house to same property ina GF could release a huge amount and leave her with same lifestyle but without he maintenance

Agree some basic planning ideas so she has time to consider the choices will help. The super fund planner sessions and meeting could be worthwhile and avoids fees for what is limited advice.

She should consider the maximum she can salary sacrifice now to build what she can afford. Little things like $1k a year in non-concessional (ie own savings) to get the $500 free kick from the ATO too.

 

So for any income earns above $45k she will be paying tax plus Medicare of 34.5% so voluntary contribution for amount above this threshold is still saving 19.5% tax on the contribution amount.