Social security in retirement
Whilst social security benefits alone may be insufficient to provide for the lifestyle that many people desire in retirement, a great number of people use the social security system to help supplement their income needs, in addition to accessing their superannuation and other savings.
Different social security payments exist depending on the person’s situation, whether they are unemployed, disabled, a carer, have reached their age pension age. A person’s eligibility to receive social security support is also measured by means testing a person’s level of income and assets.
The most common income support payment for people aged 65 or over (referred to as older Australians) is the Age Pension.
What is the Age Pension?
The Age Pension is paid to those who meet certain requirements, such as reaching their Age Pension eligibility age, residency requirements, and where their level of income and assets are below certain thresholds (subject to a means test).
Centrelink is part of the Department of Social Services, an Australian government agency that administers social security payments and services (including the Age Pension) to Australians.
What is the DVA?
Next to Centrelink, you may have also heard of the DVA. The Department of Veterans’ Affairs (DVA) provides entitlements to eligible veterans who have served in the defense force. While means testing income and assets for veterans is similar to that applied for non-veterans, the DVA provides certain non-means-tested payments for eligible veterans. Also, DVA clients reach their Service Pension age earlier than social security Age Pension age. Veterans should generally approach the DVA for eligibility, rather than Centrelink.
There are a number of different types of DVA pensions, including the Age Service Pension, Veteran Payment, Disability Pension, War Widow’s and Widower’s Pension.
Who is the Age Pension for?
The Age Pension is designed to provide income support to older Australians who need it, while encouraging pensioners to maximise their overall incomes in retirement.
Why is the Age Pension needed?
Longevity risk is one of the biggest risks facing retirees and is the risk that a person will outlive their savings. This could be caused by number of factors, including increased life expectancy, inadequate retirement savings, inflation, market performance, or unexpected expenditure (e.g. those relating to health issues).
For the 2.6 million people currently receiving the Age Pension (62% of the Australian population aged 65 and over), it provides a safety net for older Australians who need the income support to meet their day-to-day expenses, as well as help supplement their overall retirement income needs over the long-term.
Features and benefits
- Income supplement(s) for eligible older Australians,
- Safety net for managing longevity risk for retirees,
- Access to concessional cards to help reduce ongoing health care costs.
For additional information regarding Age Pension or any other social security payments, please contact KDM Financial and Estate Planning on 1300 731 372 to schedule an initial meeting with one of our Financial Planners.