When Will You Retire?
There has been much social and political debate since the federal government proposed pushing out the age at which Australians can access the age pension.
Although most occupations don't have a legislated retirement date, there is little doubt that our tax and social security systems do have a significant impact on when many of us retire and how we plan to do it.
Here are a few examples:
I'll retire when I can get the age pension
For some, this will be a necessity. They can't afford to retire unless the pension is there to support them. Currently, this means age 65 for men and between 63.5 and 65 for women, depending on date of birth. From 1 July 2017, the qualifying age for the age pension for both sexes will increase from 65 to 65½ years. It will then rise by six months every two years, reaching 67 by 1 July 2023. If the current government’s proposal is passed, this will increase to 70 by 2035.
If your retirement doesn't line up exactly with the relevant pension age, there may be some good alternatives to consider. If you leave work earlier, would you consider drawing on your retirement savings for a year or two before the pension begins? Alternatively, working for a couple of years past pension age could qualify you for the Work Bonus which financially rewards age pensioners who wish to continue working.
I'll stop work when I can get my hands on my superannuation
Generally, unless you die, become disabled or suffer financial hardship, the earliest time you can draw on your super is when you reach the so-called ’preservation age’. Again, this is different for people of different birth years: 55 if you were born before mid-1960 and rises gradually to 60 for those born after July 1964. There are also political rumblings that this too will be increased.
There are other options you may want to consider, such as drawing on non-super savings if you retire earlier.
I will wait until my super is tax-free
Waiting until after you reach 60 to access your super tax-free is a good option if you’re ready to retire at what is, these days, a relatively young age. The downside of retiring “early” at 60 is that your retirement savings must last the distance and given that Australians are living longer, this could be another two decades. However, with good advice, there will be many opportunities to structure a suitable tax-effective retirement plan no matter when you plan to leave the workforce.
The decision of when to hang up your boots for the last time can be a difficult one emotionally and financially. A licensed financial adviser can assist in ensuring that the date you choose puts you in an optimal financial position.
Australian Government Human Services www.humanservices.gov.au Work Bonus Scheme