Help others, support yourself

Supporting your loved ones is noble, but not if it sees your super disappear too early or leaves another family member or friend feeling aggrieved.

By Angelo Lombardo - 3 min read

Angelo Lombardo

As a Member Solutions Consultant at Russell Investments, Angelo Lombardo understands all the ins and outs of super and retirement legislation, and loves to answer questions and help members.

At retirement, it can be tempting to access your superannuation to help family and friends in need to get ahead in life. Supporting your loved ones is noble, but not so much if it sees your super disappear too early, or if it leaves another family member or friend feeling aggrieved.  

Here are a few important considerations before dipping into your super to assist others once you’ve retired:

Pay yourself first 

A rule of thumb when drawing down from your superannuation nest egg is to apply the common budgeting strategy of ‘pay yourself first’.  

Paying yourself first can help to ensure your savings, super and other income (e.g. Age Pension) can cover your ongoing costs and standard of living, including a buffer for emergencies. Once you’re comfortable that you can pay yourself, then reassess how you would like to use your super. 

If you had taken advantage of programs like GoalTracker® before your retirement, you would have a good idea of how much you need to fund the lifestyle you want in retirement.  

If not, another guide is the figures published by the Association of Superannuation Funds of Australia on average amounts that people spend each year in retirement. 

What you’ll need in retirement

Comfortable lifestyle (p.a.) Modest lifestyle (p.a.)
Couple  Single Couple Single
 $70.806.43  $50,207.02  $45,946.62  $31,867.31
Source: Association of Superannuation Funds of Australia, Budgets for various households and living standards for those aged 65-84, June quarter 2023. 

Think before you gift

Before outlaying your retirement savings on a gift for someone you love, it’s important to research the potential financial consequences.  

A common peril for retirees is gifting without understanding the impact it could have on your Age Pension. A gift of more than $10,000 in one financial year, or a gift of more than $30,000 over five financial years, will likely reduce your Age Pension payment. Gifts that exceed those one- and five-year limits will count in your Centrelink assets test and will be deemed in your income test for five years after the gift date. The gifting limits also apply to singles and couples combined, so your partner’s pension payments may be affected, too. 

However, if you gift less than the limits you can reduce your assets and, in some cases, increase your Age Pension payment. 

Think again before being a guarantor 

Going guarantor for another person’s home loan carries significant risk at the best of times, let alone in retirement. There are ways you can protect yourself from losing your home, super and credit rating should your loved one default on their home loan.  

One option is to guarantee a portion of the home loan. For example, you may wish to cover just the 20% deposit of a home. Another option is to time your exit as guarantor. If you initially guarantee the entire loan, and repayments are met comfortably, there will be a time when the borrower has sufficient equity in the home and no longer needs a guarantor. This could be your cue to exit your role and avoid future risks.  

Update wills and powers of attorney 

Regularly updating and planning your estate in retirement allows you to be flexible as you and your family’s circumstances change. Take steps to make sure other people don’t take advantage of you and that your retirement savings will get distributed in accordance with your wishes. 

Having professional legal help in drafting or updating your will can help to stop you from being influenced by potential beneficiaries to the detriment of others, ensure your thoughts and intentions are respected and that your assets are distributed appropriately. 

It’s also wise to appoint an enduring power of attorney to make legal and financial decisions for you if you are unable to do so yourself. Choose someone you trust to look after you and make financial decisions that will be in your best interests.

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Issued by Total Risk Management Pty Ltd ABN 62 008 644 353, AFSL 238790 (TRM) as trustee of Russell Investments Master Trust ABN 89 384 753 567. Nationwide Super and Resource Super are Divisions of the Russell Investments Master Trust. The Product Disclosure Statement (‘PDS’), the Target Market Determinations and the Financial Services Guide can be obtained by phoning 1800 555 667 or by visiting russellinvestments.com.au or for Nationwide Super by phoning 1800 025 241 or visiting nationwidesuper.com.au. Any potential investor should consider the latest PDS in deciding whether to acquire, or to continue to hold, an investment in any Russell Investments product. Russell Investments Financial Solutions Pty Ltd ABN 84 010 799 041, AFSL 229850 (RIFS) is the provider of MyTracker and the financial product advice provided by GoalTracker® Plus. General financial product advice is provided by RIFS or Link Advice Pty Ltd (Link Advice) ABN 36 105 811 836, AFSL 258145. Limited personal financial product advice is provided by Link Advice with the exception of GoalTracker® Plus advice, which is provided by RIFS.

This communication provides general information only and has not been prepared having regard to your objectives, financial situation or needs. Before making an investment decision, you need to consider whether this information is appropriate to your objectives, financial situation and needs. If you'd like personal advice, we can refer you to the appropriate person. This information has been compiled from sources considered to be reliable but is not guaranteed. Past performance is not a reliable indicator of future performance. To the extent permitted by law, no liability is accepted for any loss or damage as a result of reliance on this information. This material does not constitute professional advice or opinion and is not intended to be used as the basis for making an investment decision. This work is copyright 2022. Apart from any use permitted under the Copyright Act 1968, no part may be reproduced by any process, nor may any other exclusive right be exercised, without the permission of Russell Investments.