Does a part-time job in retirement work for you?
Maybe you can’t wait to give up work forever. But having a part-time job in retirement offers health and income benefits that could make it worth considering for your future lifestyle.
Boosting your super
For many people in their retirement years, one of the most compelling reasons for continuing with paid work is to make ends meet. According to a recent research report from the Association of Superannuation Funds of Australia (ASFA), the average super balance at retirement is $292,500 for men and $138,150 for women1. And with life expectancy on the increase for everyone2, it’s pretty likely your average retiree is going to need to supplement their super savings with another source of income – such as the age pension.
But relying on the age pension could mean limiting your budget for meeting day-to-day living expenses, let alone ticking things off your retirement bucket-list. By the age of 70, an average couple can expect to spend $33,784 each year to live just a modest lifestyle, or $58,326 for a more comfortable standard of living3. So if your super balance is average at best and you’re planning to enjoy life to full in retirement, a part-time income could be just what you need to budget for all the travel, entertainment and creature comforts you’re looking forward to.
Better health outcomes
Although the majority of Australians retuning to work after retiring are motivated by financial need, 28% are still working just to keep busy and stave off boredom 4. That’s quite a lot of people who just aren’t quite ready for a life of leisure. And according to a 2009 US study published in the Journal of Occupational Health Psychology, that drive to keep busy can have important benefits for your mental and physical health. Data from interviews with 12,189 participants taking part in the six-year study shows retirees who continued to work experienced fewer major diseases and fewer functional limitations than those who fully retired5.
Outcomes for mental health weren’t quite as positive across the board. For retirees who continued to work in a role related to their previous career, mental health outcomes were better compared with their fully retired peers. But these mental health benefits weren’t shared by retirees who had switched to a new career. So if you want to enjoy a better income and overall wellbeing, it seems that sticking with what you know is less stressful and more beneficial.
Maximising your super savings and your pension
If you’re prepared to keep working part-time, it can have a significant impact on how long your retirement savings will last. By earning even a modest salary for a few years into retirement you can reduce the amount of income you draw down from your super. By having a higher super balance, invested for longer, you’ll enjoy the benefits of greater compounding returns. With both you and your super earning that little bit more, it can make a substantial difference to how much you can afford to spend in retirement and for how long.
And if you’re eligible for the age pension, you can still earn $250 per fortnight without reducing the pension you’ll be paid. When you apply for the age pension, Centrelink applies an income test and an assets test to determine whether you’ll be paid a pension and how much you’ll receive. Under the Work Bonus scheme, anyone who is old enough to be entitled to the age pension will have their assessable employment income reduced by $250 per fortnight. So if you earn exactly $250 in two weeks, it won’t affect your pension eligibility.
Let’s say you earn just $200 in a fortnight, then you can put $50 towards your Work Bonus balance, and use this amount to further reduce your assessable income if you were to earn more than $250 a fortnight in the future. This gives you some flexibility in the amount you can earn from week to week without sacrificing income from your pension. You’ll be adding to the Work Bonus balance when you’re earning less than $250 per fortnight or when you’re not working at all, however you can accumulate a balance of up to $6,500.
Making the most of all your finances
Everyone’s circumstances are unique and you may already have commitments to family and community that are quite enough to keep you healthy, active and engaged after leaving work. And it’s important to take a good look at your whole financial situation to make sure adding a new income stream is actually going to make you better off. You’ll need to explore how a part-time income could impact your tax position as well as your eligibility for government benefits. So it’s worth checking with Centrelink and the ATO to determine whether your earnings will make a positive difference overall to your retirement income.
Whatever you plan to be doing in retirement, a CERTIFIED FINANCIAL PLANNER® professional can offer valuable advice on preparing for a secure financial future and managing your income needs in retirement.
1 ASFA Superannuation Account Balances by Age and Gender, December 2015, page 3,https://www.superannuation.asn.au/ArticleDocuments/359/ASFA_Super-account-balances_Dec2015.pdf.aspx
2 Sydney Morning Herald, Australian life expectancy hits all-time high, Peter Martin, 27 October 2016,http://www.smh.com.au/federal-politics/political-news/australian-life-expectancy-hits-alltime-high-20161027-gsccau.html
3 ASFA Spending patterns of older retirees: New ASFA Retirement Standard, September 2014, page 5,https://www.superannuation.asn.au/ArticleDocuments/359/ASFA-RetirementStandardOlder-Sep2014.pdf.aspx
4 Australian Bureau of Statistics, Retirement and Retirement Intentions, Australia, July 2014 to June 2015, “Commonly reported reasons for returning to the labour force were ‘financial need’ (43%) and ‘bored/needed something to do’(28%)”http://www.abs.gov.au/ausstats/abs@.nsf/Latestproducts/6238.0Main%20Features3July%202014%20to%20June%202015
5 American Psychological Association Press Release, 13 October 2009,http://www.apa.org/news/press/releases/2009/10/working-retirees.aspx
Online source: Produced by The Financial Financial Planning Association of Australia and published on 26 May 2017. Original article.