will paying off the mortgage affect your Age Pension?


James Coyle, Chief Customer Officer at Retirement Essentials, goes over the pros and cons of whether you should pay off the mortgage before you retire.




One in five of the people we see at Retirement Essentials has a mortgage on their home. Many also have money in the bank, super or other investments. This can sometimes be costly because for every extra $1000 you have in assets above the minimum assets threshold your Age Pension declines by $78 per year. A couple with $100,000 less in assets could get $7,800 per year more in Age Pension - a big difference!


Your home is exempt

It's important to remember that your home is exempt from the assets test… even if it is worth $10 million! However, Centrelink also doesn't take into account the mortgage on your home. So if you had $200,000 in the bank and a $200,000 mortgage, Centrelink will calculate that you have $200,000 in financial assets. If you used the $200,000 to reduce the mortgage then you will most likely get more pension (up to $15,600 more per annum for a couple).





So, should you pay it off?

People receiving the Age Pension that use their savings or investments to reduce or pay off their mortgage could benefit in a couple of ways:

  • mortgage payments will decline
  • Age Pension payments could increase as their assets will be less

On the flip side, they won’t always be better off. For instance:

  • their investment earnings will reduce
  • they will lose some of the flexibility of having ready cash in the bank

The upshot? Some people would be better off paying off their mortgage but not everyone will be. That’s why we would always recommend getting financial advice before making a decision.



need retirement advice?

Look no further.

This article is provided by Retirement Essentials Representative Number: 001260855.  We are an authorised representative of SuperEd Pty Ltd ABN 88 118 480 907 AFSL #468859.  This information is not intended as financial product advice, legal advice or taxation advice. It does not take into account your personal situation, goals or needs and you should assess your own financial situation, consider if the information is suitable for you and ensure you read the relevant Product Disclosure Statement (PDS) if you choose to make any changes to your financial situation. It is always advisable to consult a financial adviser before making financial decisions.

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