Centrelink Q&A: When is the best time for my wife to retire?

David’s wife is considering retiring soon, but he wants to get the timing right.

Centrelink Q&A: When is the best time for my wife to retire?

David’s wife is considering retiring soon, but he wants to know how to get the timing right.

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Q. David
My wife is presently on long service leave at half pay. She will retire very soon. Is it better to retire before the end of the financial year or at the beginning of the new financial year? We have received different answers to this question, and some say it doesn’t matter.

A. There are a number of different factors to consider when timing your retirement. Some people do not have a choice, finding themselves out of work before they reach retirement age, whereas others plan to retire on the day that they become eligible for the Age Pension.

One of the first decisions your wife will have to make as she approaches retirement is what to do about her leave entitlements from your employer. If she is taking her long service leave, she may want to consider taking the rest of her leave as well. There are two reasons why this is a good idea.

First, if she has a considerable amount of leave accrued with her employer, she can continue to earn extra leave while taking her break.


Second, her employer continues to pay superannuation into her account while she is taking whatever leave entitlement she is owed.

If she would instead prefer to take her leave entitlements as a lump sum, then she will have to think about timing her retirement appropriately. The reason is the tax man.

If your wife retires before the end of the financial year, her lump sum leave entitlements will be added to her earnings and could potentially lift her into a different tax bracket. This could result in her owing the Australian Taxation Office money when she completes her tax return.

The alternative is to retire early in the new financial year, and to try and keep her earnings down so that her leave entitlements attract the lower tax rate, making a big difference to the way she starts her retirement.

Are you eligible for an Age Pension? Do you know your rights? The PensionChecker™  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 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 Centrelink Financial Information Services officer, financial planner, lawyer or tax agent in relation to any aspects that affect your financial and legal circumstances.





    COMMENTS

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    Spitfire
    7th May 2019
    11:21am
    Preferably never, can you imagine, the daily peace would become non existant, daily directions on what to do, freedom gone.
    Karl Marx
    17th May 2019
    10:41am
    rofl
    Karl Marx
    17th May 2019
    10:48am
    I timed my retirement at the end of July. I had to give 1 months notice & didn't trust the company to actually give notice earlier in case they finished me up before July 1.
    This was to minimise tax for a lower tax rate. If I retired at the end of the financial year my payout of long service & accrued holidays would of pushed me up into a higher tax bracket.
    A quick calculation means I'll get approx $9k-$10k back from the ATO come July.
    Better in my pocket than the governments
    Cowboy Jim
    19th May 2019
    10:25pm
    That was the way I did it 13 years ago, worked then as well. Let the wife retire when she is good and ready, pointless listening to all the crap that goes on when she's not happy at work.
    Karl Marx
    19th May 2019
    11:57pm
    The hardest part is when you set the date that you want to retire & actually getting up in the morning to go to work. Had 3 montbs of sickies in that last year lol. Once I gave notice it was easier, kicked back & did as little as possible. Being micro managed from 2000 klms away helped as he was way to lazy to fly up to Brisbane to see me or pick my brian or say happy retirement after 17 years of underpaid service lol.
    Never looked back.