Do I need to be retired to get the age pension?

I turn 67 in June and I currently work four days per week. I’m hoping in June to reduce my working hours to two days per week, earning $1000 per fortnight. I’m single and my assets – including my super – are $280,000. Can you apply and receive the age pension if you have not officially retired from work but are working reduced hours?

You do not need to be retired to access the age pension. In your situation, you’ll be assessed on the income test.

As you are a new pensioner from January 1, 2024, and if you earned $26,000 a year for employment, you get a work bonus credit of $4000 – plus the first $300 per fortnight of employment income will be ignored for the income test. You should qualify for some age pension.

Even if you’re only partially retired, you can still be eligible for the age pension.Credit: Simon Letch

Our self-managed super fund (SMSF) owns several properties in the United States. Last year we had two insurance claims on the properties. The US insurance companies will only issue cheques, but St George/Westpac refuse to accept them as they no longer accept cheques. My concern is that when I receive a refund cheque from the Internal Revenue Service or another company that issues cheques – how on earth does one deposit that? How do Australian companies with properties and other investments in the US manage?

The Australian Banking Association is aware of the problem, which will be exacerbated as cheques are gradually phased out. They say the remedy is to use the SWIFT (Society for Worldwide Interbank Financial Telecommunication) system, which facilitates secure and swift international payments between financial institutions worldwide.

It ensures efficient transfer of funds, enabling businesses and individuals to conduct cross-border transactions seamlessly. Over 11,000 financial institutions across more than 200 countries and territories use SWIFT. Furthermore, HSBC bank tells me that they will accept cheques in US dollars on behalf of customers. Maybe it’s worthwhile opening an account with them.

I have often heard the term reverse mortgage. I believe it means borrowing on your bricks and mortar, but would like to know what is involved in the process. My wife and I are in our mid-70s and hopefully will have enough to see us through. We own our home and are in no debt. We do not have children. If we ever needed to instigate such a loan, what are the pitfalls?

A reverse mortgage is a loan on your home on which you make no repayments of principal and interest. The youngest borrower must have reached 55 years, and ASIC has set a percentage of the home value as a maximum loan amount for each year of an applicant’s life.

This enables people to stay in their home and avoid the cost of moving. A typical loan might be to someone who needs $50,000 for minor home renovations, or to take a trip because it might be the last one.

Because of the way the mathematics works, the loan will probably double every nine years. Each borrower must obtain independent legal advice on the mortgage documents.

In an ideal situation, the loan is so small in relation to the house value that the appreciation of the house should be more than the compounding effect of the loan. Imagine if you are 75 with a house worth $900,000, and you took a reverse mortgage of $100,000 at 8 per cent interest.

There would be $800,000 of equity left. In 15 years the loan balance would be $317,000 – and if the house appreciated at 3 per cent a year, it should be worth $1.4 million.

I’m selling some property, but not planning to buy anything – and even if I buy I would have about $150,000 to invest. Would the money be better in a long-term bank account or invested in the All Ordinaries Index? If I wanted to invest in the All Ords, how would I get started?

Cash is good short-term but not long-term, as its value is eroded by inflation and the interest offers no tax benefits. If you invested that money in a good Exchange Traded Fund such as VAS or STW that matched the All Ords index, you would receive income of around 4.5 per cent mostly franked plus capital growth.

The great thing about the index is there are no choices to make, and you have instant liquidity. Just bear in mind that the portfolio will rise and fall with the market, so be prepared to stay in for the long haul.

Noel Whittaker is the co-author of Downsizing Made Simple with fellow finance expert Rachel Lane, available here. Email: [e-mail]

• 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 circumstances before making any financial decisions.

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