Living Off The Single Age Pension
I’ve been helping a friend who is transitioning to work out what living off the single age pension will look like. With thoughts of near poverty, watching every 5c coin like a hawk, I wondered what their quality of life might look like. To my surprise I discovered that you can certainly live well off the single age pension. In fact you can move from surviving to truly thriving. You can have the top health insurance, take 4 or 5 domestic air trips each year or 1 really nice international holiday, maintain a gym membership, buy decent presents for the grand kids, have a smart phone, eat out a few times each month, support your hobbies, eat well and even give away 10% of your income to charity. There are however a few things you need to do to make this a reality.
Know Exactly How Much Pension You Will Receive
If you’re going to be living off the single age pension you need to know what’s coming in. With an income test and an assets test, complex deeming rules, it can be hard to figure out just how much your going to have coming in. Centrelink do have a calculator that you can use, or you can use my Pension Calculator and Budget spreadsheet. Just get the latest payment rates from Centrelink or DVA and plug in the figures relevant for your pension. The spreadsheet will do all the calculations and show exactly how much you should expect to receive each fortnight (note everything is calculated fortnightly as this is how pension payments are paid). Now you know how much your getting in, time to make a budget.
Make A Budget
When you’re young and money keeps rolling in you can get away without a budget (not that I’d recommend it!), but when you’re living off the single age pension a budget is essential. You can’t just fly blind and hope to make ends meet. You need to track your spending for a month, get out your monthly and annual bills and make yourself a detailed budget. This will help you prioritize your spending, know where you can cut down, see if you need to earn a few extra dollars and focus on what’s most important. Again feel free to use my Pension Calculator and Budget spreadsheet. You will likely need to add a few items that are specific to your life, but this should cover most costs you face. Plug in what you’re currently spending and we can go from there.
Minimize Housing Costs
If you want to be living off the single age pension, you can’t continue to service a large mortgage or pay big rents. Ideally you’ve managed to own your own home by this time, but what if you haven’t? Don’t fear, you can still make ends meet. Let me make a few suggestions if owning your own home is out of reach.
Share rent with someone else you’re happy to live with, a friend or maybe in the granny flat with the kids. You might like to think you’re past share renting, but this may be the best option so you can enjoy your life. I know plenty of pensioners who are doing this and are doing great. It essentially turns the single pension into a couples pension but better by splitting all the fixed costs of living together and shared ownership.
Move to a Cheaper Suburb or Retirement Village
It may be time to say goodbye to the inner city suburbs and find yourself a home or retirement village you can afford. Downsize to a small apartment or retirement duplex. If you can own your space outright it will make life much easier and you’ll have plenty of cash left to travel, see the grand kids and enjoy life. It’s far better to spend on life than pouring resources into a house you really can’t afford.
Reduce Other Fixed Costs
Your fixed costs like mobile phones, internet, insurances and utility bills account for a large part of your budget. Anything you can do to reduce these costs means more money for the fun stuff that makes life more interesting. Make sure you shop around each year and get yourself the best deal you can on these fixed costs. You could likely save a thousand dollars or more each year by doing this. You’ll find a growing list of up to date suggestions and recommendations of this site. Every time I get one of these bills I search around and post my findings, so sign up to my newsletter and you’ll be updated along the way.
An Extra $5000 Goes a Long Way
If you can supplement your single age pension with an extra $5000 or so each year it goes a long way to making life comfortable. This can be the difference between barely meeting life’s necessities and having more than enough to do the hobbies and travel you’d like to do. So how can you pocket yourself an extra $100/week? Here’s a few suggestions.
Wisely Invest The Money You Have
If you fortunate enough to have a stash of cash, you can put this money to work for you. At this stage of life passive income is what you need, no more regular work for you. Perhaps you’ve got some super left over, or maybe when you downsized it freed up money from a previous house. This is by far the easiest way to earn a few extra dollars. Ofcourse, if you have too much centrelink will take their share, but you are still far better off with it than without it.
If you invest in cash your return will be almost nothing. High interest savings accounts are not that high anymore. If you want to make your money work more for you, consider investing in a safe, diversified, low fee managed fund. I’d suggest an index fund as these have the lowest fees and the widest diversification. They won’t make you rich, but will return easily double what you would get in fixed interest accounts. And don’t worry if the market crashes, it will rebound, set it and forget it. The quarterly or half yearly cheque will come in and keep you going. A competent financial planner can help you with this, just be wary of high fee funds that promise the world.
Rent Out Space In Your Home
If you do own your home, by now you have a house with spare bedrooms. Put that space to work for you to earn passive income. An international student or friend using that space and sharing costs will return way more than $100/week. You might not like the idea of sharing your space, but this may be the very thing that allows you to leave that space and travel. Use what space you do have and turn it into income and lifestyle.
Turn Your Hobby Into Dollars
If you like knitting, make and sell some things on ebay or etsy. Enjoy gardening, offer your services to others in your retirement village. Got a trade, do a little of what you used to do on the side for your friends and neighbors. Enjoy trading, buy and sell things from garage sales. This isn’t the time to hold down a full time job, but if you can take your skills, talents and hobbies and turn them into a few dollars, do it. Again, every dollar you earn goes a long way and will pay for all the special extra things beyond just the necessities.
Do Some Surveys
There’s heaps of online survey companies that will reward you with gift cards. Not much, mind you. This won’t get you to $100/week, but an extra $20 here and there is nice to get. The negative with surveys is they take a long time for little reward (not what I’d recommend for someone who is time poor), but this is probably the one season of life where you are time rich. Use that time to turn it into some extra spending cash.
Tap Into Your Savings
If you’re still short of that extra $5000 and you do have some savings, there’s no reason not to slightly reduce your capital year on year. If you had $100000 and you took the whole $5000, it would still take you 20 years to deplete. Chances are you wont’ need to take that much, so it would last a lot longer. There’s no point going without if you have money available. The kids will be fine, use that money to make your life more enjoyable (I’m sure the kids would agree!).
So even on the single age pension you don’t need to be wearing your clothes threadbare, missing meals and giving the grand kids second hand socks for Christmas. Not only can you make a living off the single age pension, but you can live it up and enjoy life. If you know someone who is on or headed onto the single age pension, you might want to share this with them.