The home Pam is looking at buying is $500,000 and she will have $50,000 of moving related costs. If she downsizes she will have $650,000 of investments earning $26,000 a year and zero age pension, which is $11,024 a year less income than if she stayed at home.
If Pam could exempt $200,000 through a pensioner savings account she would retain $15,510 a year of her pension and combined with $18,000 from her investments would have an income of $33,510 per year – still slightly less than if she stays in her current home.
If the pensioner savings account enabled her to exempt all proceeds from her home she could continue to receive the full pension and have $11,000 a year from her investments giving her $40,000 a year of income. In the longer term the pensioner savings account could assist Pam to meet the cost of aged care.
Part of solving the current housing crisis needs to be removing financial barriers for people who want to downsize. Since the majority of people over 65 receive a pension, that would seem like an obvious starting point and the pensioner savings account could be a simple but effective way to do it.
Rachel Lane is the author of the bestselling book Aged Care, Who Cares? and Downsizing Made Simple with fellow finance expert Noel Whittaker. The new edition of Downsizing Made Simple is now available online.
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