Means-test move gives age pensioners options

IF you have a burning money issue, or you want to win a fight with your spouse, put your questions to Barefoot Investor.

Bills time

IF you have a burning money issue, or you want to win a fight with your spouse, put your questions to Barefoot Investor.

Q Hi Scott,

I live on a half an acre (2000sq m) but am finding it tough to maintain after my husband died last year. I want to downsize but I'm concerned that Centrelink will cancel my age pension if I have extra money in the bank. What options do I have?

Jenny

A If your assets (excluding your home) exceed $731,500, then you would not receive any age pension at all.

But it's not all bad - if you've got that much money, you're going to earn more than the maximum rate of the pension ($21,000 a year) anyway.

Even if you don't qualify for the age pension, it doesn't mean that you will lose your concession card benefits.

You could also apply for a Seniors' Health Care Card.

In this month's Budget, the Government announced it's going to trial a means-test exemption on pensioners downsizing their homes, with the following catches:

1) You must have been in the home for longer than 25 years.

2) At least 80 per cent of the excess proceeds must be placed into a special account.

3) The proceeds will be exempt for up to 10 years or until a withdrawal is made from the account.

4) A maximum of $200,000 (including interest) will apply to the account.

If the policy sees the light of the day then, theoretically, from July 1, 2014, you could sell your house and invest the majority in this special account, which wouldn't be assessed by Centrelink.

Remember though, what you lose in age pension you will always make back (and more) by investing the money and achieving reasonable returns.

PLENTY OF MOJO

Q Dear Scott,

My partner and I have $120,000 left on our mortgage (we are roughly $12,000 ahead), and each have just over $50,000 in savings. Do we use that to pay off the mortgage or look to invest in a rental property or shares?

Tanya

A I don't know your income, or the value of your home - but it's pretty clear that you guys are absolutely killing it. Your only danger is that you'll listen to some bozo talk you into doing "something" with that $50,000 to generate a higher return. Don't listen to them.

That money is your financial Mojo - so don't touch it. From now on, set aside a meaningful amount each payday to buy shares. Start off with old faithfuls like AFIC and Argo Investments, and branch out to individual companies when you get more comfortable.

READY TO SHARE

Q Dear Scott,

After my marriage break-up three years ago, I have a mortgage of $105,000, on which my repayments are $750 a month. I have no other debt.

I earn $50,000 gross, I have $25,000 in savings and $150,000 in super. I had been putting extra into my super but have stopped that and am paying an extra $600 a month off my mortgage.

I would love to buy some shares and have been thinking of a $4000 share package from ComSec - but I would really like to buy something in Berkshire Hathaway, as I've heard you talk about it a lot. Would this put me on the right track?

Thanks, Joanne

A You're already on the right track: your mortgage is more than manageable, you've got Mojo set aside, and your super appears to be ticking along nicely (but that depends on your age).

First, begin salary sacrificing into your super fund. Then, ask them whether they have a "direct shares" option that allows you to use your contributions to buy individual blue-chip shares. Finally, open an international trading account with an Aussie broker and buy some Berkshire Hathaway B-class shares.

SMALL GOES BIG

Q Hi Scott,

I'm looking at investing with the Smallco Investment Fund, as it has achieved a 23 per cent return in the past three years. Do you have any recommendation on it?

Peter

A No, I don't. But today's winning fund managers are often tomorrow's losers. Make sure you read their product disclosure statement, and keep an eye out for their fees - that's the one thing you can control.