Their assets are too high for them to receive an age pension, so they live off the dividends from the share portfolio of $32,000 a year, and a refund they receive from excess franking credits of $13,000.
Their total income is $45,000 a year.
According to the Association of Superannuation Funds of Australia, the required annual income for a modest retirement is $39,775 and a comfortable retirement requires $60,977.
While Alan and Bev aren’t living much more than a modest lifestyle on $45,000 a year, they feel like they are good with their money but need to keep a close eye on their expenses.
However, Alan and Bev will end up with less than the full age pension if Labor’s policy to end franking credit refunds is enacted.
It would remove their refund of $13,000 from franking credits and leave them with just $32,000 a year in income – a reduction of 30 per cent.
I found part-time casual employment to offset the financial impact
Alan and Bev are now left wondering how they can reduce their already tight budget.
The Labor Government argues that while these changes may require some retirees to draw down on their superannuation balances to maintain their income streams, that is how the retirement income system is intended to function.
For Alan and Bev, this will mean that their super fund balance will decrease at a faster rate and leave them relying on the Government’s Age Pension down the track.
Alan and Bev aren’t the only ones affected.
Over the past few months, retirees have been attending public hearings across the country with personal stories of how abolishing refundable franking credits will unfairly hit people of modest incomes, and who are unlikely to be able to return to the workforce to make up the lost income.
Margo’s claims that the policy is «grossly unfair.»
“I never, ever expected, in this day and age when there is so much discussion about fairness, that a proposed government would change the rules once we’d started playing. It’s just not right,” she said.
Michael was one of the lucky ones who had a chance to go back to work. He had only just retired when he heard of Labor’s franking credits proposal.
“I found part-time casual employment to offset the financial impact,» he said.
«I am fortunate. Many people our age are trapped without opportunity or ability to work and are not eligible for the age pension until age 67. I am still six years away from that”.
A range of people likely affected by the Labor proposal were also concerned about the need to re-arrange their investments, and to significantly reduce spending in essential areas, such as private health insurance and, instead, rely on the public health system.
Olivia Maragna is the co-founder of Aspire Retire Financial Services and is an independent financial expert. You can follow Olivia on Facebook or Twitter.
Olivia Maragna is the co-founder of Aspire Retire Financial Services and is a respected and independent financial expert.