Debbie McTaggart explains why you don’t have to give up work and whether this means you can still get a pension.
I am approaching Age Pension age but don’t think I’m physically, emotionally or financially ready to give up work. How best can I explore my options without committing to anything long-term?
A. Firstly Rob, it’s important to understand that reaching Age Pension age doesn’t have to mean giving up work. There are several options available to you to help gradually reduce the hours you work, or to build up a larger super nest egg.
As you are over 60, you may wish to consider a Transition to Retirement Pension (TTR). This works by taking money from your superannuation fund and starting an Account Based Income Stream (ABIS) or an allocated pension. You then draw down a portion of your pension each year, with limits applying depending on your age. The advantage of waiting until 60 to do this is that your withdrawals are not subject to tax, nor are any earnings generated in the fund. Another advantage of a TTR is that you are not obliged to withdraw all of the money from your super. This means that you can continue to contribute to your super fund, taking advantage of any concessional tax rates which may apply. Such an arrangement may also mean that you are able to work a few hours less without having to significantly reduce your income. You should consult an independent financial advisor to discuss your individual circumstances before considering a TTR arrangement. For more details on investment options, visit the National Information Centre for Retirement Investments (NICRI).
Once you reach Age Pension age you can continue to work, access the money in your allocated pension and perhaps also claim the Age Pension. The Age Pension is subject to income and asset tests and you can find details of the latest limits from YOURLifeChoices website.
In order to encourage older Australians to remain in the workforce beyond Age Pension age, the Government introduced the Work Bonus in 2009. This essentially means that the first $250 of your salary per fortnight is exempt from the Income Test. If your income is irregular, you can ‘bank’ any unused portion of the Work Bonus, to a maximum of $6500 per annum. A chat with a Centrelink Financial Information Services Officer (FISO) will help you to ascertain if you will qualify for a full or part Age Pension. You can make an appointment any time, whether you’re an existing customer or not, by calling 13 23 00.
Of course, this only deals with the financial aspects of retirement. The emotional consequences of retirement really depend upon the individual. Only you can know if you’re ready to take the leap into retirement, but there are some tools available to help you weigh up your options. YOURLifeChoices has a handy Ready to Retire quiz which may give you an indication of the areas you need to consider. Also, Get a new life has a chapter with many useful suggestions on how to make the most of the second half of your life. Good luck!