As you probably know, capital losses from falling share prices are realised only if the company goes into liquidation or the shares are sold.

Leaving investments intact may well offer the best chance to rebuild balances when markets pick up again, as they eventually do.  But, this holding pattern can be hard for older people with account-based pensions due to the requirement to draw a minimum income each year. For many people in residential care, this could be 7-15% of the balance at July 1.

Halving the draw-down amount is similar to a measure the government took as a result of the 2008 global financial crisis.  The minimum income levels will again be halved for this financial year and next year. If the cash flow is not needed, people might wish to reduce their pension withdrawals. This could be especially so where higher Centrelink pensions may be likely.

Cash Study:   Graham is 85 and living in an aged care facility. His account-based pension had a balance of $220,000 on July 1, 2019. He needed to draw 9% of that balance ($19,800) as income in 2019-20.

Graham regularly draws amounts of $1,650 a month, so he has already taken out $14,850 this year. Combined with share market drops and low interest rates, his pension balance has now dropped to $168,000.

Graham wants to minimise how much he draws. The halving of the minimums means he can stop drawing any more income this year and take out less next year as well as he’s also eligible for the two cash bonuses that will be paid of $750 each by Centrelink, as he’s on the Age Pension also.

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