Many seniors will wake up to a rude shock come January 1. That’s the day that the biggest changes to Age Pension Assessment in a decade will apply (if you missed it, here’s a quick summary of the changes). Some estimates say the Age Pension Assets Test could have as many as 200,000 pensioners receive lower part pension payments and up to 100,000 lose pension payments altogether.
That will be a very frightening scenario for some retirees. Tough decisions might be needed on how best to stretch savings.
Of course, the real problem isn’t now, but how we’ll fund pensions in 5, 10 or 20 years’ time.
The reality is most Australian retirement aspirations are seriously underfunded and future budgets will come under immense pressure from the strain of paying for age pensions, health services, age care and related housing costs. It really is the 'elephant in the room' in Australian politics with successive governments only willing to provide band aid solutions when comprehensive answers are needed.
So if you are reading this and wondering, “We’re living longer and the cost of that living is going up, how will me nest egg provide me with a dignified retirement?” , here are some of the traditional options you could consider:
Well, there’s another option that has become popular – move overseas.
I’ve just had a fascinating discussion with a client (Simon) who has moved to Malaysia.
The Malaysian government has a very attractive initiative that is marketed as Malaysia My Second Home (MM2H) which the government actively promotes inviting non-residents to consider Malaysia as their retirement destination.
Why would you?
Well, using Penang as an example, the cost of renting a three-bedroom apartment in the city is 80% lower than in Sydney. When it comes to dining at restaurants, the meals are more than 70% lower and groceries 60% cheaper. Other benefits of living in Malaysia include:
"This will not be the retirement option for everyone. However, living in Malaysia has allowed me to maintain my living standard without eroding my savings. I just couldn’t have achieved that in Australia", said Simon.
"Health care and aged care (including retirement living) in Malaysia is much more affordable when compared to Australia".
He also said that the distance isn’t the issue that it once was. He Skypes his kids and grandkids regularly and says he might even have more contact with them now than he used to.
Simon continued, “While maintaining my Australian citizenship, I can keep assets in Australia and access money through ATM's. What I’m also seeing is that some people put their skills to good use as teachers, tradespeople, consultants and the like. It’s a great way to keep active, get involved in the community, meet people and earn a little extra money, not to mention it’s great for the local community”
If this sounds like an option for you, don’t go contacting your real estate agent just yet. Here’s a list of things that Simon and I put together that we thought would be important considerations for anyone considering a move to SE Asia:
Retirees will need to brace themselves and expect even further changes to pensions and other entitlements - it's simply inevitable!
Maybe if you have an adventurous spirit like Simon, living overseas could be the answer for you.
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