Unretiring: How to navigate going back to work

Are you retired but feeling a certain longing you never imagined you’d feel? Are you longing to wake up with a purpose each morning? To pack your lunch and plan your commute again? Well, you’re not alone.

A study published by Cambridge University Press revealed that about 25 per cent of retirees return to the workforce, with half of them doing so within five years.

Reasons people are returning to work

Retirees opt to re-enter the workforce for many reasons. Some need the income to pay bills, while others are looking for extra spending money. Some retirees also want to work because it’s fulfilling and a productive use of their time.

Some retirees return to the workforce because their previous employer asked them to. Others see new opportunities in a strong job market. A ResumeBuilder survey reports that:

  • 20 per cent of retirees say past employers have asked them to return because of a labour shortage
  • 34 per cent of retirees have considered going back to work because of job opportunities available in a labour shortage
  • 41 per cent of retired workers would go back to their former position, while 59 per cent would seek other employment
  • 58 per cent of retirees would prefer to switch industries, with a majority of these respondents preferring to switch specifically for a less stressful job.

Read: Why retirement planning must be personal

Financial planner Nick Bruining told Money Mag that often retirees find it hard to adjust and find a purpose in life.

“People underestimate the psychological impact of retiring. Many people enjoyed what they were doing and the status it brings. Being a doctor, accountant, lawyer or teacher has a lot more status than ‘retiree’.”

No matter the reason, more and more people are unretiring or contemplating it. And with Australia undergoing a skills shortage generated by the pandemic, it might be a great time for retirees to seek employment again.

Mr Bruining says employers often approach former employees to do fill-in work. “It may be intermittent or seasonal, or at other times ask them to work a day or two a week.”

If this sounds familiar, there are a few things to keep in mind before diving back into the workforce.

What happens if I’ve already accessed my super?

If you’ve retired before reaching your 60th birthday, you must have reached your preservation age. When accessing your super, your fund will likely ask you to sign a declaration stating that you’re no longer in paid employment and you intend to retire permanently. Providing your intention is genuine at the time and you don’t intend to return to work after retirement, you can sign this and receive your super pension.

There’s nothing stopping you from returning to work if your circumstances change or you change your mind though. And because you’ve already satisfied a condition of release, you can continue to receive your super pension after you return to work.

From age 65 you can access your super whether you’re retired or not, without having to satisfy any special conditions of release.

When going back to work, you can continue to draw an income stream from your account-based pension, but you will need to open a new accumulation account in order to receive your employer’s compulsory 10 per cent super contribution, plus any extra contributions you wish to make.

However, once you turn 67 you can only make voluntary contributions if you satisfy the work test. Currently, you need to show that you’ve worked for at least 40 hours in a 30-day period during the financial year you make the contribution.

Read: Advocacy group calls for cap on superannuation balances

Voluntary contributions can’t be made once you turn 75. The one exception is downsizer contributions made with the proceeds from the sale of your home. There is currently no upper age limit on downsizer contributions.

It’s important to get on top of the rules: the annual contribution caps, your total superannuation balance, any age-based requirements and your transfer balance cap. These ages and numbers can change, so discuss them with your financial planner, accountant or superannuation fund. 

Remember, you can’t add to a pension once you’ve commenced it, Colin Lewis, head of strategic advice at Fitzpatricks Private Wealth, told Money Mag.

“But what many people don’t realise is that if you have started an account-based pension you can stop the pension at any time and commute it, or transfer it back to accumulation phase.

“The advantage of that is that because the money was sourced from non-preserved monies, it’s accessible and remains non-preserved even if you put it back into accumulation phase. You can access it whenever and however you want,” says Mr Lewis.

The downside is that once your money leaves the tax-free retirement phase and goes back into the accumulation phase, the underlying earnings are taxed at a maximum of 15 per cent.

Unretiring and the Age Pension

You need to be aware of what going back to work will mean for any Centrelink benefits you may be receiving.

“The issue here is that your entitlements are means tested. If you generate too much income or accumulate too much in the way of assets because you’ve gone back to work, you may end up reducing or even eliminating the pension you’re entitled to,” says Mr Lewis.

“Going back to work means more money is coming in, which in turn may bolster your bank account if you’re not spending it. Be careful that your new salary or your increased bank balance doesn’t put you over the limits of what you can earn to keep the Age Pension.”

Earning extra income up to a certain amount won’t affect your pension payments. Currently, a single person can earn up to $180 a fortnight ($4680 a year), couples can earn a combined income of up to $320 a fortnight ($8320 a year).

The trick is to keep things to a level that still allows you to qualify for your entitlements.

You are also required to let Centrelink know you are receiving additional income within 14 days.

Read: Seven tips for living well on the Age Pension

The Work Bonus

The government also has a Work Bonus scheme designed to encourage people to stay in the workforce after reaching Age Pension age.

The scheme works automatically and $300 a fortnight is added to your Work Bonus balance, up to a maximum of $7800 a year.

It’s not money you can withdraw but it acts as an offset in the income test for any extra money you earn. So you could potentially earn an extra $300 a fortnight, on top of the amount allowed for singles and couples, without affecting your Age Pension.

That means a single person could potentially earn up to $480 a fortnight ($12,480 a year), couples an extra $620 a fortnight ($16,120 a year) and still receive the maximum Age Pension.

Do you still work? If so, how much do you work each week? Do you enjoy it? Let us know in the comments section below.

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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.

Written by Ellie Baxter