30th Aug 2018
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Pitfalls to avoid if you are forced to retire early
Author: Olga Galacho
Avoid this if you retire early

So retirement is creeping up on you or perhaps you were forced to retire early due to changes in your workplace or health. What’s next?

The key thing you must avoid is doing nothing. As tempting as it might be to take time out to chill after you’ve hung up your hat, this could lead you in a destination you don’t want to arrive at – loneliness.

A study by the Institute of Economic Affairs found that the chance of developing depression climbs by 40 per cent when someone who is used to being around people at work or socially suddenly stops work.

By all means, set aside time for ‘you’ – after all, you’ve been working for years and deserve a break – but make sure the respite is part of a larger plan. That plan may include ways to continue making some money, regardless of whether you qualify for the Age Pension or not, plus activities several times a week that will get you out of the house and mixing.

According to personal finance site WiseBread, your plan should incorporate some of the following:

  • live relatively modestly and save
  • build financial roadmaps so you can budget for spending goals
  • if you have the resources, buy an investment property and earn passive income by way of rent
  • go back to studying and learn new, relevant skills
  • now that you have the time, devote some to building stronger relationships with family and friends
  • adopt and nurture a new passion or hobby
  • reach out to charities who need volunteers
  • and, importantly, travel.

At the top of the list, of course, should be investigating your income entitlements. If you are not yet of retirement age, you may qualify for the Newstart Allowance and some concessions on bills.

If you have reached retirement age, investigate how to access your superannuation and use our RetirePlanner tool to see if you are eligible for a full or part Age Pension.

Next, book appointments with your accountant or financial planner, a senior member at your bank branch and a Financial Information Service officer at Centrelink. These professionals will be able to answer your questions about entitlements plus give you tips on how to manage your finances going forward.

The Department of Human Services has more information for those looking at an abrupt retirement. To contact a Financial Information Service officer, call 132 300.

What tips do you have for anyone facing an early retirement? How busy do you have to stay to avoid becoming bored and lonely when you stop working?

Are you eligible for an Age Pension? Do you know your rights? The RetirePlanner™ tool has all the information you need.

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    Disclaimer: All content on YourLifeChoices website is of a general nature and has been prepared without taking into account your objectives, financial situation or needs. It has been prepared with due care but no guarantees are provided for the ongoing accuracy or relevance. Before making a decision based on this information, you should consider its appropriateness in regard to your own circumstances. You should seek professional advice from a financial planner, lawyer or tax agent in relation to any aspects that affect your financial and legal circumstances





    COMMENTS

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    Charlie
    30th Aug 2018
    11:10am
    Wonder what the new disability pension has to offer.
    Too late for me I have age/disability pension, but the old one had a few traps to reduce payments and dry up savings.
    SuziJ
    30th Aug 2018
    11:23am
    What new DSP?
    MICK
    30th Aug 2018
    11:29am
    Thought it was interesting suggestion to go buy an investment property. Been there done that....and then you get caned and cut out of a part pension. The better advice would be to go see a retirement specialist. Not a kid out of school but a seasoned professional who know how the system works. Then chart a course which likely incorporates a chunk of superannuation. Then make out of super investments if required.
    I hate articles by authors who have only a part idea and this one is definitely one for the professionals.
    Rae
    30th Aug 2018
    2:17pm
    I agree MICK. An investment property made sense when yields were 5 to 8% but at current 2 to 3% and with the new asset test an investment property is the last thing you'd be doing after 50.

    Certainly talk to an experienced advisor and a good accountant before doing anything.

    I'd add leaving the super to run as long as possible and going New Start. It's something to do and pays a little bit.

    They didn't mention check with the union re the entitlements from redundancy.
    TREBOR
    31st Aug 2018
    10:13pm
    Rules ... is no man... is no problem!Enough stress during the application process to kill the applicant.... Moskva Rules ... is no man... is no problem!
    TREBOR
    31st Aug 2018
    10:14pm
    Somehow that got d1cked up... repeats....

    Enough stress during the application process to kill the applicant.... Moskva Rules ... is no man... is no problem!
    Anne
    30th Aug 2018
    12:39pm
    I have been unsuccessful in finding regular employment in the past three years. I've been studying at postgrad level, and plan to continue.

    I reach preservation age in December. I've decided to take the money and run. My son and daughter-in-law want to buy a house. They have agreed I can build a granny flat in the backyard if the house itself is not suitable for dual-living.

    It's a great solution for all of us. They need a deposit and I need a stable home.

    I firmly believe the government will move to prevent large withdrawals from super in the short to medium term and I don't trust them or the super company to look after my interests.

    I can no longer afford to rent in Sydney, so the co-buy option with the kids is a good one.

    I will be getting a granny flat interest document to ensure that if I need to access Centrelink in the next five years, I'll satisfy the "reasonableness test" under the gifting rules.
    Rosret
    30th Aug 2018
    12:57pm
    You haven't done it yet.
    If you want the definition of loneliness try living in that granny flat knowing your family is in a home altogether, laughing, sharing, eating together and you sit alone watching TV fully aware the ones you love dearly are just a breath away and you need to give them your space.
    I wouldn't recommend it. You go from being the matriarch of your dynasty to the dog in the kennel out the back.
    Hasbeen
    30th Aug 2018
    1:40pm
    We bought & installed a transportable totally independent living granny flat for my mother when dad died.

    She lived in it for 20 years, & loved it.

    In her late 90s it became unsafe for her to live alone, & she moved into a nursing home, but came home for most weekends. She wanted to live in her 'own home" on these weekends, not in our house, which was a bit of a worry for us, but nothing we couldn't handle.

    If she was lonely, no one would know, & she obviously loved her home. Even for her 98Th Christmas, she cooked the Christmas pudding, although someone was with her through that, with boiling water a bit dangerous at that age.

    I say do it. It suited mum, & is great for many.
    Rae
    30th Aug 2018
    2:25pm
    I've seen it work very well. My son built a flat for his wife's mum and they are adding a little apartment for me. My daughter is sorting out accommodation and so is my country son. I plan to spend a few months with each when the time comes and rent out my house for extra income.
    I have already gifted the kids so they are happy to share back.

    Loneliness is a state of mind which can be changed with effort. Time together and apart can be sorted.
    Anne
    30th Aug 2018
    2:30pm
    My daughter-in-law is Colombian. Her extended family lives together in Bogota. She thinks it's strange that families don't live together in Australia.

    I will be on hand to spend time with my lovely granddaughter, but also have time to myself. I also have two grandkids in Sydney, so will be sure to not neglect them...

    Kids in two states are hard, but not impossible.
    Rae
    31st Aug 2018
    6:52am
    I think it is strange too Anne. The sales idea of putting the olds into a nursing home that costs heaps and you can't even get medical attention has obviously done it's dash. Greed is like that. In my experience it always ends up in tears one way or another.

    The modern idea of splitting families is no longer affordable. It was a great idea for those wanting to make money but with money in short supply now it no longer is viable.

    The tradition of extended families living together is coming back and that's a good thing.
    Farside
    4th Sep 2018
    3:08pm
    Anne, I urge caution settling in the backyard at your age. It may be a valid option 20 years down the track but for now your family do not know what the future may hold. If you do decide to go ahead, consider services when you can no longer drive, arrangements if you or they want to have pets, visitor entry etc i.e. think about when your 75-80 years rather than mid-50s. I can relate three different experiences.

    My father lives in a second cottage with its own entrance on my brother's property; this was a great idea until Dad lost his license and his isolation makes him a virtual prisoner in his own place and reliant upon others to take him shopping, men's shed, lodge etc.

    My mother lives independently in a small place. She hoped one of my brothers would move in with her but it is no surprise it did not happen! Nevertheless she is thriving and has access to more services where she lives than my father. When she needs home help she will look at inhouse options (like free board to a carer) before considering a nursing home.

    The worst situation is that of my mother-in-law who, when widowed at your age, built a granny flat behind her daughter at her son-in-law's request. This worked well for a decade and began deteriorating after her daughter's children left home and her daughter's husband was then transferred to Darwin. The family wanted to sell the property but could not do so while the mother-in-law lived out the back. The family relationships have become more fraught. As she became more infirm in recent years it has become increasingly lonely for her and disruptive to her daughter's family since they moved back rather than selling. This might have been less of an annoyance if there were more privacy and a separate entry.
    Anne
    30th Aug 2018
    1:00pm
    Rosret, I have live by myself in a small Bangkok condo in recent years. I know I don't need a lot of space and I was extremely comfy in my little condo.

    I enjoy my own company. I have already told them I will not be having communal meals every day or babysitting every night.

    I have my studies (about to finish masters and planning to go on to PhD), so I will value time away, but will still appreciate having them "next door".

    Co-living isn't for everyone, but I assure you I will not be in a dog kennel out the back...
    Anne
    30th Aug 2018
    1:01pm
    lived*
    Hasbeen
    30th Aug 2018
    1:22pm
    Been there done that. I lost my job at 58, when the owner of the little group of companies I was running was offered too much for them to refuse. I did not like the look of the type of jobs I could get at that age, so retired.

    I earned just enough to live on with a small semi-professional nursery, & bought a car. Not just any car, but a 1980 very run down sports car. I had not driven anything but transport type cars since my youth & had only a little mechanical knowledge from some time racing cars back then. The idea was to try to fix it up a bit, & have fun.

    I found a wealth of knowledge, advice & friendship offered on the net, & the local car club was equally friendly & helpful. A year of leisurely work gave me a moderately nice car, that ran well, but now I wanted more.

    I bought 2 of the same cars that had not run in years, for peanuts. This time it took 2 years to build one from the 2, & I farmed out the upholstery & final body work & paint, so ended up with a really beautiful car, in as new condition. It has similar performance to, & is much nicer to drive than any of the mid range modern hatches, but cost me little more than the cheapest new cars.

    That was 16 years ago, & I am still enjoying that car. I now have like minded friends all over Oz & infact in much of the world.

    Give it a go. It is not rocket science, & you'll be overwhelmed with help & advice. As the saying goes, "If I can do it, anyone can do it".
    Anne
    30th Aug 2018
    1:25pm
    My stepfather was given his first car in the 1930s. It was completely dismantled, and he had to put it together before he could drive it. He used to stuff hay into the tyres if they were flat.

    Being self-sufficient and creative are great skills to carry into our "dotage"...
    KSS
    30th Aug 2018
    1:33pm
    Something left off this list is about how people who define themselves by their job cope. If someone goes through life describing themselves as a .....teacher, gas fitter, shop owner lawyer etc, what happens when they can no longer do that? Where is their identity then? Loss of identity is as much of a problem for some as loneliness.
    Jenny
    30th Aug 2018
    1:52pm
    Whatever you do, don't just sit back and do nothing. My husband was retired out at 56, and 26 years later he is still sitting back and doing nothing. Of course it has been so long that he is no longer capable of doing anything! No help to me as I maintain house and garden as well as look after him, and not much company either.
    GrayComputing
    30th Aug 2018
    2:28pm
    If your are planning for retirement are in retirement then to this

    It is time for all of us (that means you) to rant at our MPs and Senators daily to take action for human decency and a huge stress reduction for pensioners

    NO ASSET TEST FOR A PENSION EVER AGAIN!
    A pension is not welfare.

    Most economist say we will save taxpayers money by dropping asset testing because of the massive overheads cost in running Centrelink and the 10,000 conflicting rules.

    Hiring more Centrelink staff will only increase taxpayer’s costs for processing the creeping insane red tape monster system politicians and well paid bureaucrats have created.

    Help scrap it now. Become a hero.

    Even poorer New Zealand has a NO ASSET pension so it is cheaper and user friendly.

    Why worry that few million$ earners get it too. That is peanuts to them, not enough for a good vintage champagne.

    Do retired and retiring people really look forward and want 100++ visits to/from Centrelink and be part of 3 million waiting queues and lost calls?

    Does your MP really like being part of the system that allows this indirect abuse of the elderly?

    This abuse is actually sponsored by our government and forced down to Centrelink and borders on a criminal act.

    Why do MPs normally compassionate persons let this Centrelink abuse happen at taxpayers’ expense?

    Some opposition and independent MPs stand to lose their chance at being part of the needed government changes

    We all need to tell our MP and senators every day that these criminal asset tests for a pension must be dropped now.

    DEMAND: NO ASSET TEST FOR A PENSION EVER AGAIN!

    Help yourself and others, today and every day, pass this demand on to all government, opposition and independent MPs and senators who could help us to get a fair deal on pensions
    leek
    31st Aug 2018
    8:21am
    Rae- good post. my thoughts as well.
    olbaid
    30th Aug 2018
    3:36pm
    Those thinking of retiring early should hold off until next years elections.
    If Shorten gets in you will lose your franking credits, and OAP eligibility raised to 70.
    You will have to re-do your financial planning
    OnlyGenuineRainey
    30th Aug 2018
    5:40pm
    No point planning. Both parties are out to demolish retirement plans and grind us all into poverty. LNP have already crucified 330,000, and they're not done yet. Only difference between the two parties is the ALP aren't as likely to attack the poorest. They only hate the upper working and middle class, whereas LNP hates everyone except the filthy rich silver spooners.
    Rae
    31st Aug 2018
    7:07am
    The two parties will continue destroying our quality of life in their stupid class warfare.

    I agree if you can hold onto work then do so. If you get shafted then get everything you are entitled to and go on Newstart. Do not draw down Super early.

    The Liberals will hit workers hard and Labor will hit investors and business.

    The 330 000 have little sympathy anymore for those complaining their income from dividends might be cut as they have already lost their income through austerity brought on by deliberate Government policies.

    Those with annuities or defined benefits have even less sympathy as they couldn't change a thing. At least shareholders can sell dividend producers and buy capital gains. The discount is still around for that.
    TREBOR
    31st Aug 2018
    10:12pm
    'forced to retire early'.... hmmmmmm ....... just hmmmmmmmm...


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