Retirement has changed. We’re not only living longer, but we’re healthier and more active than ever before. This has all kinds of implications on our retirement and the amount of money we need to sustain our lifestyles.
In response, the government has amended the rules around working in retirement, income, and assets to provide more flexibility.
We’ve outlined some of the ways you can potentially boost your retirement income and enjoy a more independent lifestyle.
Getting back into the workforce
Retirement carries with it the expectation that you’ll wrap up the 9-5 grind and put your feet up, but that isn’t always the case.
If your personal or financial circumstances change after you retire you can return to the work force. This became more common following the 2008 Global Financial Crisis, which saw savings drop, and new retirees returning to the job market in order to make up the shortfalls.
Given the current economic climate caused by the coronavirus pandemic it's possible that we’ll see a similar uptake of part-time work by some retirees.
If returning to work is something you’re considering, and you’re already accessing your super in retirement, there are certain rules you need to be aware of.
Part-time work and the Age Pension
If you’re receiving the Government Age Pension, any employment income may reduce your benefits. Your eligibility for a Pensioner Concession Card may also be affected.
If you’re single you can earn $178 per fortnight before your Age Pension is reduced. It will drop by 50 cents for every $1 you earn over $178. Couples who are both eligible for the Age Pension can earn $316 a fortnight (combined) before they see any impact on their payments. It will also drop by 50 cents for every dollar of income over this limit.
Visit the Government's Money Smart website for more details on Age Pension benefits.
The Work Bonus offers additional flexibility
While there are caps on how much you can earn before it impacts your Age Pension payments, the government’s Work Bonus scheme is a new initiative that provides additional flexibility around your income.
The Work Bonus increases the amount an eligible pensioner can earn from work before it affects their pension rate. It means the first $300 of fortnightly income from work is not assessed and is not counted under the pension income test.
If you don’t earn the full $300 per fortnight you can accumulate and carry over the unused amounts (up to $7,800) for future income.
For example, if you haven’t worked for a year, you accumulate $7,800 of unused work bonus. If you then earn $4,000 for contract work over a six-week period, this won’t impact your Centrelink payments (and will leave you with another $3800 in income for the year before your payments are impacted).
The important thing to keep in mind is that you need to notify Centrelink. While you don’t need to apply for the Work Bonus, you do have to report your income for the Work Bonus to be applied.
The long-term financial benefits
Aside from the social and active benefits of returning to work, it can also help your long-term finances. Supplementing your super with a part-time income means you’re drawing down less money, which means your savings can last longer and continue to be reinvested. You may even be able to add to your super.
At the end of the day everyone approaches retirement differently. The important thing is finding a lifestyle that works for you.
For more personalised advice please speak to one of our financial planners about part-time work in retirement.
Togethr Trustees Pty Ltd (ABN 64 006 964 049; AFSL 246383) is the trustee of MyLifeMyMoney Superannuation Fund (ABN 50 237 896 957; SPIN CSF0100AU). Financial advice services may be provided to members by the trustee's related entity Togethr Financial Planning Pty Ltd (ABN 84 124 491 078; AFSL 455010).
The information contained herein is general information only. It has been prepared without taking into account your personal investment objectives, financial situation, or needs. It is not intended to be, and should not be, construed in any way as investment, legal or financial advice. Please consider your personal position, objectives, and requirements before taking any action.
© 2020 Togethr Trustees Pty Ltd. For further information please our contact our Service Centre on 1300 655 002 or visit our website: mylifemypension.com.au.