YOURLifeChoices no-nonsense financial planner Maurice Patane answers Bruce’s question about returning to work post-retirement.
I am 66 and retired a year ago, at which time I accessed the Age Pension and part super pension. I am bored and now have the chance to return to full-time work. What does this mean financially? Who do I have to report to? And will I be penalised?
A. You should be congratulated for getting yourself into a position of financial independence – having enough income so that you don’t worry about money. This is a position which many others envy. Believe me, I know.
You are also testament to the fact that behind every great accomplishment is a sound financial strategy. Quite often we fall in love with the idea of retirement, believing it is the ‘magic pill’ which will ensure we ‘live happily ever after’. We then cease work, only to find we have lost our identity and purpose, and as you say, become bored or even worse, depressed.
Personally I believe it is just as important that, when planning your retirement income needs, you also consider your retirement lifestyle needs. Think about how you will spend your time. Spend as much time on the right side of the brain – connecting with your hopes, fears, purpose and your emotional drivers – as you do with the numbers which ensure you will be financially independent.
Bypassing this ‘right brain’ step could see you going back to work, retiring and again being bored.
If we buy into the idea that we are to give and receive the most we can from our lives, then retirement at any juncture has new meaning and possibilities. In your case, you can afford to be more selective about the work you choose. In addition, you provide yourself with an even greater probability that you will outlive your money and have more options in your later years regarding your health, aged care and housing.
You should note that, under the Work Bonus scheme, you are able to earn up to $250 per fortnight of employment income, and it will not count as income for Age Pension purposes. Importantly, this is in addition to your superannuation pension. Interestingly, if you earn less than $250 in a single fortnight, the difference or unused amount is added to your Work Bonus balance, which can accumulate to $6500 and be carried forward across financial years.
Let’s say you earn $200 in one fortnight. This amount will be disregarded for Age Pension entitlements and the $50 unused amount will be added to your Work Bonus balance. You can then earn up to $300 in the next fortnight and again have this amount disregarded. Any income above the income-free threshold will reduce your Age Pension by 50 cents in the dollar for a single pensioner and 25 cents in the dollar for each member of a couple.
Of course, you will be required to advise Centrelink of your gross earnings and it will automatically deduct the correct amount under the Work Bonus before applying the relevant income test.
If your total income (assessable super pension and employment income) impacts on your Age Pension, you may consider reducing your superannuation pension by the same amount of employment income to provide a more favourable result.
Your superannuation pension will continue to be tax-free as you are over age 60, while your Age Pension and any employment income will be assessable. Speak to your accountant or adviser to determine whether you will be required to pay any tax, as there are tax offsets available.
Retirement should not be a cliff to jump from, but a journey through which you continue to map out what you like and don’t like. There will be bridges in and out of employment, volunteering, and more.
Maurice Patane has been a financial planner for over 25 years. His experience has shown him that many Australians are not living the lives they dream of or wish for, which is often due to poor financial decision-making. Maurice is dedicated to helping everyday Australians take control of their financial future, so that they no longer have to worry about money.
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