After the kids have grown up and left, selling the family home to free up some extra money for retirement might sound like a good plan.

But before you put your house on the market, there are some important things to consider.

Impact on the age pension

The amount of pension you are entitled to depends on the worth of your assets and income, calculated according to the assets test and income test.

While your home and the two hectares surrounding it are exempt, if you sell your house, any profits you make could count towards the assets test. This means your age pension and other entitlements could be reduced.

If you do sell your home, the government allows a 12-month grace period where the profits will be exempt from the assets test, if you plan to buy another home. If you buy a cheaper house, any surplus will be counted in the assets test.

So if you’re thinking about downsizing the family home, you might want to first consider whether there are any practical alternatives.

Alternatives to selling

Selling the family home and moving to a different area can be a very emotional and stressful experience. But there are alternatives to selling that you could consider:

  • You might be able to convert your home to a dual occupancy so you can live in one half and rent or sell the other half.
  • There's been an increase in homeowners building granny flats around Australia. These offer many benefits including accommodation for your extended family, a home office, or rental income.
  • Perhaps you could rent out a spare room or two. This has tax implications and may affect your age pension so seek financial advice if you’re interested in this option.
  • Maybe a reverse mortgage could work if you need extra cash and have solid equity in your home. It’s a type of home loan that allows you to borrow money using the equity in your home as security. The loan can be taken as a lump sum, a regular income stream, a line of credit, or a combination of these options.

Don’t forget that any additional income could affect your age pension entitlements. Centrelink offers a Financial Information Service that can help you find out how your entitlements may change.

Need help?

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Age-proofing your home

If you prefer to stay in your own home when you retire, you can! All you need to do is adjust some features and remove potential hazards.

Reduce the chance of mishaps

To reduce the chance of a mishap at home, start by assessing the potential hazards. Is the carpet a bit lumpy? Is it a tripping hazard? Are the shower and bath easy to access? A modest bathroom renovation with a walk-in shower could make a big difference.

Here are a few renovation ideas to consider:

  • step-free entrance with a safe continuous path to the street
  • firm floors
  • wide corridors that are easy to move through
  • bathrooms with wide openings, high seat toilets, step-free shower recesses and adjoining walls reinforced so that grab rails can be added, if needed
  • kitchens with a metre of space in front of benches and high-task lighting over benches
  • laundries with secured appliances at bench level
  • easy to reach power points, positioned well above floor level
  • light switches at door handle height
  • enough space beside the bed and toilet for a walking frame
  • capstan style or easy lever tap hardware.

Get help to your home

You may be able to access benefits to get help at home, for example, through your local council or a home care package. Getting help at home can help reduce the risk of mishaps and may include assistance with transport to appointments, preparing meals, showering or vacuuming.

Find out more about help at home options

Alternative living arrangements

Even though downsizing could have an impact on your age pension entitlements, it could be worth it. It’s possible that downsizing will free up enough capital for the retirement lifestyle of your choice.

There are a lot of alternative living arrangements you could consider. Here are some popular options:

Retirement villages, lifestyle resorts and over-50s villages

Community living provides on-site security, emergency systems and staff to meet the residents’ needs. Some villages include cafes, pools, restaurants and cinemas. The style of housing varies from high-rise apartments to single or multiple bedroom villas. With demand increasing, the choices are expanding to keep up.

Granny flats

Granny flats are a great way to be closer to your family and have a role in the lives of your grandkids.

There are a lot of designs which can be built on most residential-zoned blocks. Costs start from around $20,000 for flat-packs to designer units to match your budget. Additional costs include cement slabs, site preparation and connections.

Do your homework before making any decisions including contacting your local council to check regulations.

Caravan/motor home

Living the grey nomad lifestyle sounds romantic, but here are some things to think about before you swap your current home for one with wheels:

  • What if you become ill or need emergency medical attention? Make sure you have appropriate insurance cover.
  • Can you maintain the vehicle? What if it breaks down out the back o’ Bourke?
  • What will you do with your furniture, belongings, and so on? Factor in long-term storage.
  • Motor homes and caravans, like cars, depreciate very quickly in value, especially if you’re planning to travel far and wide. When you’ve got the road bug out of your system and want to return to a fixed address, be aware that you may not sell your wheels for as much as you’d like. Of course, this will affect how much you can pay for your next home. 

Sea or tree change

A sea or tree change can give you a nice lifestyle in a relaxed environment away from the hustle and bustle of the city life.

But at the risk of stating the obvious, before you choose your new town, do your research. Consider things such as the weather, transport facilities, how easy it will be for family and friends to visit, and the quality and accessibility of health services.

It’s a good idea to ‘try before you buy’ so why not rent for six to twelve months to make sure that your chosen location is really what you want.

Moving overseas

Moving overseas is growing in popularity as retirees look for ways to stretch their budgets and enjoy a good standard of living. While living on the pension in Australia often means a modest lifestyle, this isn’t the case in many lower-cost countries. There are thousands of retired Australians living in Bali, Thailand and Malaysia and using their age pension to largely cover their costs.

Before you start planning your move, make sure to check the quality of health services in your country of choice. And be aware that the government may restrict access to the age pension for retirees living overseas in the future.