A successful retirement is something that takes a lot of planning, and for many Australians, the financial aspects of planning their whole future can be stressful, confusing and inherently complicated. Whilst we may have spent our working lives dreaming of reaching sixty and leaving work, the realities of retirement just aren’t that straightforward. With people now living longer than ever in retirement, you actually need more money in the pot to retire than you might think.
You may well reach retirement age and find that you simply don’t have as much money as you expected to have in your pension pot: Women, particularly those women that took time out of their careers in order to raise a family, are often the hardest hit by government policy that dictates that an individual must have worked a certain number of years in order to receive a decent amount of super on retirement. You may also reach retirement age and realise that you love your work and you simply aren’t ready to give it up, even if you can afford to. There are a hundred reasons why you might not be ready to retire. So what are your options if you have reached retirement age but don’t feel ready to retire? Can you still draw on your pension and work at the same time? Here are some issues to consider.
Government Incentives
The government are keen to encourage those seniors that want to, to remain in the workforce. That’s why seniors are able to continue working (either in full or part time positions) whilst still drawing on their Super. What’s more, working seniors over the age of 60 can have their Super payments topped up by their employer, enabling them to more quickly grow their retirement nest egg. If you chose to retire and claim your full pension, but would like the opportunity to return to work for regular short periods then the Work Bonus scheme is one that could be beneficial: This enables you to keep more of your income (by providing a tax break) and draw on your pension whilst still enjoying the benefits and enrichment of working life. If you are already retired and thinking about taking up work, or have reached retirement age and don’t feel ready to give up work then there are plenty of different options available to you. Australians are now largely free to choose the retirement that suits their needs.
Is Semi-Retirement the right option for Australia’s baby boomers?
More Australians than ever are now choosing to opt for semi-retirement rather than retiring completely. Good living and health prospects mean that Australians now living for longer than ever before, and that their retirement funds are therefore expected to last much longer. Semi-retirement allows individuals to ease themselves (both emotionally and financially) into the life of a retiree by switching to part time work.
Ideal Option For Many Women
Women, in particular, often benefit financially from working later in life, but on a part-time basis. This is because taking career breaks in order to raise their families and historically tending to work in lower income roles means that many women do not have enough Superannuation in order to sustain a comfortable retirement. Women are often stigmatised for suffering from health issues, or for taking time out of the workplace in order to raise their families, and this often has a negatively impact on their retirement financial planning. However, when they reach retirement age they wish to wind down and enjoy a slower paced working life whilst still maintaining a good lifestyle level and developing new interests and hobbies outside of work: Part time work (or semi-retirement) allows this. Working part time allows you to continue topping up your Super, so when you do eventually retire, you will have more money to spend on those hobbies, and on maintaining a comfortable lifestyle.
Tax Incentives
Other financial benefits of choosing to opt for semi-retirement as you approach retirement age, rather than immediately switch from full-time employment to full retirement, is that you may be able to take advantage of tax incentives aimed at seniors who choose to work part time. In order to soften the transition to retirement, the government is now offering specific tax breaks: If you are aged 55 or over and choosing to work part time in preparation for retirement, you may be able to take advantage of this transition to retirement tax strategy. This strategy allows seniors to supplement their part time salary with a draw down from their super, if necessary, once they have reached preservation age. Once you reach 60 you then pay no tax on your super income, plus your employer will continue to top up your super on your behalf. It is a win-win situation for retirees who want to work and worth discussing with your financial advisor or super fund.
More Australians than ever are now having to work longer
As most baby boomers reach retirement age, their lack of financial security means that more individuals than ever are planning to work until there are 70 and beyond, in order to fund and maintain their lifestyles, and because they simply don’t have the financial security they need to retire any sooner.
An analysis of Australian Bureau of Statistics data has found that the number of individuals aged over 45 who believe that they will not retire before turning 70 has dramatically increased. The figure has risen from 8 per cent to 23 per cent over the past decade. Rising national life expectancy means that many individuals, particularly those working in low income roles, fear they will simply never be able to retire. It used to be that their physical and mental health, as well as the desire to enjoy leisure time and live a balanced lifestyle drove the desires of seniors to retire. However now, the most common factor influencing people’s decisions on when was the right time for them to retire was financial security. This influenced the decisions of 40 per cent of men and 35 per cent of women. The fact is that early financial planning is essential if you don’t wish to work in past retirement age, and for many Australian baby boomers this is now something that is unavoidable. Fewer than 20 per cent of Australia’s baby boomers have adequate government-sanctioned superannuation and private insurance cover to fund their health care in retirement, and have no idea how they will fund other aspects of their lifestyle either.
Improved Physical And Mental Health
The good news is that the physical and mental health of the country’s baby boomer generation is better than ever, and that more individuals aged 60 plus are able to work than ever before. In fact, many individuals of retirement age simply don’t want to retire, regardless of whether or not their financial situation will enable it. Work can actually be beneficial to physical and mental health, giving a sense of purpose and plenty of beneficial social interaction. Older Australians are significant contributors who want to work longer, and make a significant contribution to our national work force. This is something that should be embraced and celebrated, as the input of our nation’s baby boomers continues to grow.
Anne Thomas