How to Retire Overseas on the Aged Pension

We all know someone who has decided to retire (at least in part) overseas. It might be Bangkok, Manila or Bali, but the reasons are usually the same -  $814 p/f [the single max rate of the age pension as of Dec 2017] goes a lot further in South East Asia than it does in Melbourne, Sydney or Perth. 

Of late, I have had a number of requests for Financial Advice from older individuals wondering how the age pension would work if they move overseas. The Federal government made a number changes in the assets test back in January and earmarked changes to the portability of the Age Pension with the announcement in 2016 to slash the amount of time Aussie retirees could spend outside Australia without having their Age Pension payments cut down to 6 weeks.

Fortunately, the change was abandoned and you can still spend 26 weeks overseas without your Age Pension payments reducing.

What Happens after 26 weeks?

After 26 weeks overseas, the majority of people will continue to receive their regular Age Pension payment minus the supplement payments. However, for those who migrated to Australia in their later years, or for those citizens who departed Australia and worked abroad, the amount they receive may be less. The formula Centrelink use in determining how much you will receive is based on the number of years you have lived in Australia, as an Australian resident, between the age of 16 and Age Pension eligibility age. This is known as the Australian Working Life Residency or AWLR.

Essentially you must have resided in Australian for at least 35 years between the age of 16 and Age pension qualification age to receive the full age pension. Note that the requirement is for you have to have resided in Australia, not worked.  

If you have resided in Australia for less than 35 years since age 16, then you will receive a proportionate amount. Lets say for example you migrated to Australia at the age of 41 and your age pension qualification age is 66. After 26 weeks abroad, you will receive  5/7ths (25/35) of the full aged pension (which is roughly $581 pf).

For more information, check out the DSS guide or get in touch with our office today.

How to Prioritise your spending

Personal Income Spending Flowchart

As usual, before reading this post, please read our general advice disclaimer!

If you are like most people, you might be in a quandary on how to prioritise your income. For those who grew up in families that lived paycheck to paycheck, cashflow management was definitely not something taught at home, let alone at school!

When I sit down with my clients and ask them what they are aiming to achieve and what they expect from me, most think about investing in property, shares, super, discretionary trusts and tax planning among other things. While sound investing is an appropriate focus, it should not come at the cost of ignoring essential cash flow management.

For those in survival mode - they simply earn income and pay expenses. The only way to escape this cycle is to earn more and spend less. But earning more and spending less is not enough,  you must also engaged in the process of cash flow management.

Real cash flow management involves the understanding of where your money comes from and where it goes, and examining what choices are appropriate to create a life of greater satisfaction. Cash flow management is an active process.

This infographic is designed to help those people who need help in prioritising their spending. While procrastinating on Reddit a few weeks back, I saw a couple of magnificent posts by /u/beached69 and /u/atlasvoid. Inspired by their work, I created the Australian "How to Prioritise your Income Flow Chart.