RSM Australia

Downsizing to improve your income in retirement

Insights for Individuals

Have you worked hard your whole life, but feel like you have not accumulated enough to fund your retirement? Well, downsizing could be the solution for you.

Let's take a closer look at how the downsizing contribution could help you increase your income in retirement and provide you peace of mind knowing you have enough to retire on.


Bert and Betty are both age 67. Bert and Betty have a property worth $800,000. They have also accumulated $500,000 in superannuation, which is invested in a balanced option.

Bert and Betty would like to draw $50,000 per annum from their investments to fund their living expenses in retirement on top of what they receive from the age pension. As it stands, they would be able to fund 13 years' worth ofgreen_illustration_asset_134x.png payments. This assumes a return of 5% net of fees on their superannuation.

Given their children have moved out of their family home, they feel the house is too big for them. As such, they have decided to sell their home and downsize to a house worth $500,000.

This has freed up $300,000. Bert and Betty have decided to contribute this to their super, under the downsizing provisions. This now gives them a total superannuation balance of $800,000.

They were shocked to find out that this would now provide them 30 years' worth of payments, an increase of 17 years! They can draw their capital well past their life expectancy and still potentially have some leftover for their children as part of their inheritance.

Alternatively, if Bert and Betty were happy with 13 years' worth of payments they can increase their drawings to $80,000 per annum. An extra $30,000 to travel the world or tick off other items on their bucket list.


As you can see the downsizer contribution into super can be a huge opportunity for you. Whether it be to extend the longevity of your capital or increase your income, it can provide you peace of mind knowing you have options in retirement.

The downsizing of your eligible property should be seriously considered if you are concerned about not having accumulated enough capital for retirement.

Please seek professional advice prior to undertaking downsizer contributions, by contacting your local RSM adviser. 

This article has been prepared by RSM Financial Services Australia Pty Ltd ABN 22 009 176 354, AFS Licence No. 238282. This article does not take into account your individual objectives, financial situation or needs. You should assess whether the information is appropriate for you and speak to a financial adviser before making a decision in relation to superannuation contributions.

Authors

Tim Grapiglia
Financial Planner - Perth