Plenty of older Australians face a serious shortfall in their super savings, and for many the only solution is to shelve plans of an early retirement.
Prior to the global financial crisis, retiring early was fast becoming the norm. Super balances were high thanks to a soaring sharemarket, and this underpinned a growing preference for retiring at fifty-something rather than in our sixties.
Fast forward to 2011 and it’s a very different picture. A flat sharemarket has done little to help pre-retirees recoup their pre-GFC super balances. A lack of funds, coupled with rising living costs, is forcing many over-55s to rethink their retirement plans. Industry research shows one in three pre-retirees believe they will have to work for as long as possible.
Finding, and holding onto, a decent job isn’t always easy for older workers. However if you can do it, the federal government offers worthwhile financial incentives to those who delay retirement.
Workers aged over-55 for instance, may be eligible to claim the Mature Age Worker Tax Offset. This offers a tax saving worth up to $500 annually, and unlike deductions that reduce your taxable income, an offset directly cuts your tax bill.
If you’re eligible for the Age Pension, the government’s Work Bonus scheme is another good incentive to keep your hand in the workforce.
Under the scheme you can exclude up to $250 of fortnightly employment income from the age pension income test. For more information, call the Centrelink Seniors line on 13 23 00 or log onto www.centrelink.gov.au.
Extending your working life also means having additional employer contributions paid into your super fund. You can fast track your fund balance with additional personal contributions.
These can be made in a variety of ways, like salary sacrifice contributions (where you have part of your pre-tax pay directed into your super), or through out of pocket (undeducted) contributions that you pay directly to your fund.
Do note, if you are aged 65 or over you will need to satisfy a work test to make super contributions. This involves working for at least 40 hours over a continuous 30 day period each financial year. You can’t make super contributions beyond age 74.
Along with financial benefits, work also offers important emotional and social pluses. Gradually winding your way out of the workforce by reducing your working hours can make the transition from worker to retiree easier to cope with.
It’s always a good idea to speak with a qualified financial planner in the lead up to retirement. This can give you a clearer idea of how your investments should be structured to maximise your retirement income and age pension entitlements. And you could even find that it won’t be necessary to work for quite as long after all.
