How to plan for retirement if you want to keep on working
I really do think we should be setting two goalposts in our financial and life plans these days rather than just aiming for retirement. Plus - some awesome letters arrived this week.
In this edition
SMH/The Age article: How to plan for retirement if you want to keep on working
It’s Sunday, so today I’m sending you my column that is featured in The Sunday Age, The Sun Herald and the Brisbane Times and WA today.
I’m quite passionate about this subject, so I urge you all to have a look. I really do think we should be setting two goalposts in our financial and life plans these days (rather than just aiming for retirement). There really is two lifestages after the peak of our career work, that are really worth working towards and enjoying, our prime time where we reach the point to ‘choose’ and our retirement.
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By complete co-incidence I got a great letter on Friday night from Nick about working in retirement (when I knew this article was on its way to print), so I’ve added that today and answered it more directly. Please, keep sending me your letters - I AM LOVING THEM! ☺️
Season two of the Prime Time podcast is in the works, so if you haven’t listened to season one year - make sure you catch up! Listen here. And don’t forget to press subscribe on your favourite podcasting platform. You can also sign up to be notified by email with detailed podcast overviews when each episode drops at www.primetimers.net.
Have a great Sunday. Sun’s out! I’m headed to swim in the luke warm beaches of the Gold Coast today and play putt putt with my youngest, but rapidly growing mid teen - a one-on-one with mum day! They’re rare and special. Book writing can wait.
Have a lovely Sunday. Make it epic!
Many thanks! Bec Wilson
How to plan for retirement if you want to keep on working
Each weekend I write a column in both the print and digital editions of The Age, The Sydney Morning Herald, Brisbane Times and WA Today money section. This article was first published here.
When we discuss the goalposts for retirement, none of us want to think about working longer than we have to, and all of us want to get excited about seemingly carefree days in the latter third of our lives.
And yet, when we talk about life expectancy for over-40s and even over-60s today, many people would think we’re crazy wanting to give up work completely at 60 or 65 if we’re likely to live into our 90s and beyond. So let’s reset our thinking about work, money and the choices we will have the power to make as we approach “retirement age”. I suggest building two goalposts for life, instead of the single one we currently call retirement.
We’re the reset generations. Anyone over 40 or 50 today has had almost 20 years added to their life expectancy in their lifetime.
In 1970, just 54 years ago, life expectancy was 70.8 years at birth in Australia.In 2024, for someone who is now 65, the median life expectancy is 85 for men and 88 for women – and in financial planning circles they say couples should plan for one of them to live beyond 95.
The even better news is that, having added nearly 20 years to our lives, our percentage of years spent in good health has stayed relatively the same.
Effectively, we’ve added those 20 years to our highest quality midlife years, not to the end of our lives. That means they can be productive and exciting years, for which we need to think about life and money a little differently.
Embracing a new life stage before retirement: your prime time
We clearly have to embrace a new life stage before retirement, if retirement means to step back from work. I call it our prime time. Prime timers have the opportunity to balance being a productive and meaningful member of the workforce, with achieving more of their personal and lifestyle goals.
The best parts of this new life stage will be available only to those who have financial certainty as they reach midlife and remain an appealing employee with the capacity to keep learning and improving.
Building a financial plan with two goalposts instead of just one
We have to plan financially for longer lives, and longer-lasting income streams acknowledging the possibility of living well into our 90s or even beyond 100.
We are the first generations to enjoy long life and super balances to offer us some level of financial support. Why not try to enjoy both.
This underlines the importance of mastering compound investing as early in life as we can. But I also want to point out that the goalposts change. We end up with two goalposts in the new financial plan: one where we can choose to prioritise lifestyle over work, potentially living in this phase for quite a few years; the other where we step back from work and retire fully, which we probably recognise as “true retirement”.
This new plan enables us, should we choose, to stay in the workforce for longer and subsidise our prime time with income from working well into our 70s. With that, we may get to take advantage of some clever strategies.
Understanding smart superannuation and tax tactics
If you want both a wonderful prime time and a great retirement, you must learn how the superannuation system works to support you in your choices.
You can technically be retired from preservation age (which varies from 55 to 60 depending on your date of birth), if you meet the conditions of release by retiring from work. Or, you can draw on your super from 65 without conditions. Importantly, you can return to working even after you have met the conditions of release and converted to retirement phase.
You can also consider a transition to retirement process. This allows you to access a portion of your superannuation while still working, and it can be beneficial for those looking to reduce working hours gradually.
This allows you to leverage the tax benefits of being technically retired according to your super fund’s criteria. And you can have an accumulation account continuing to contribute to superannuation if you meet the criteria for the work test. Or you may want to consider a transition to retirement strategy from your preservation age too.
The aim of these strategies is to facilitate drawing down a tax-free income stream from super while simultaneously making additional concessional contributions, taxed at just 15 per cent on your income. It’s called a retirement and re-contribution strategy, and it’s where financial advisers do some great work.
Separating technical retirement from real retirement
Understanding the distinction between technical retirement and real retirement is crucial. You can be technically retired in Australia according to your super fund but still working according to the tax office.
To access your superannuation, you need to meet the conditions of release, allowing you to convert your super into the retirement phase. Importantly, many people might not realise that, after meeting the conditions of release, they can return to work, either part-time or full-time.
Two awesome letters today! One about work and one about gap years! Enjoy!
Working in retirement
Hi Bec. My journey to writing this email started with your Sunday paper column. I must commend you on the wide range of interesting topics ( I’m 62 ).
I’ve also subscribed and just finished reading your book. My favourite chapter was The science of happiness.
I have read other retirement books that concentrated purely on the taxes, investing, super and pension stuff but nothing as wholistic as your book.
It did help me get thinking on a number of points as I’m about 12 months from tapering off full time work so thanks.
At 63 I plan to quit my high stress full time job. As my wife is 7 years younger she wishes to work for several more years.
One question that I have that I haven’t seen covered or answered anywhere is this:
So you meet all requirements “retire” and convert your accumulation account to tax free pension phase. And some time later you let’s say 1 year later you pick up some casual or part time work to fill in time or social contact. Does this have any effect on your pension account ? Is there a minimum salary you can earn or any factors which come into play?
Hi Nick, Thanks for your note. Be sure to read the above article in the newspapers today. There is a couple of areas you want to consider:
The operations of your super fund - which, as I explain in the above article, you can consider technical retirement in the eyes of your super fund a little different to ‘actually retiring from work completely’. That is, you can meet the conditions of release for your superannuation by stopping work once, and shift it into retirement phase, remembering you will then have to make the minimum compulsory drawdowns at least. Then you can return to work and there is no really big restrictions - full time, part time, casual - the world is your oyster. You’ll want to be across the criteria for the work test. And you will have to open another accumulation account so your employer can contribute to super, so there is a bit of administration to understand. You’ll draw a tax free income from super, and you’ll be able make concessional and non-concessional contributions up to the age of 75. Just be aware there’s a cap to contirbutions - If at 30 June in the previous financial year, your total superannuation balance is greater than or equal to $1.9 million, you won’t be able to make any non-concessional contributions to super.
It’s also worth understanding the intricacies of the Age Pension and working, if you are eligible for it. You can still work and draw on the age pension, there is just some caps and rules you need to be across. These are discussed at length in my book in the Age Pension section. There are limits to how much you earn, and the amount you draw in pension will decrease the more you go over these caps. Take some time to understand:
1. The pension income free area, which allows you to earn $204 a fortnight as a single or $360 as a couple without affecting your pension income test (remember this is wider than just work income). Under the pension income test, pensions are reduced by 50 cents for every $1 of income over the income free area.
2. The Work Bonus: You start with a credit of $4000 in your Work Bonus account each calendar year, and you can earn up to $300 per week in income from work and up to a total of $11,800 per year without affecting your pension - this is called the Work Bonus Income Bank. The income bank amount offsets future income from work that would otherwise be assessable under the pension income test. The income bank amount is not time limited; if it’s unused, it carries forward, even across years.
The Work Bonus operates in addition to the pension income free area. This means a single pensioner over Age Pension age with no other private income could earn up to $504 a fortnight from work and still receive the maximum rate of pension. Of course, if you have income from investments, that will need consideration.
It all seems fairly complex but once you learn the system it will make sense.
Your super fund will have financial advice that can look at your individual mix and help you with navigating Centrelink. That’s an area they usually have good help in. Or, it might be a good time to get some independent financial advice that sees the bigger picture for you and your wife.
That was a big topic - thanks Nick for writing in and asking. I’m sure that many others are curious because I firmly believe that working in our prime time and retirement is a valuable thing to do.
Make it epic! Bec.
Gap Years for Third Stagers
Hi Bec. I LOVE what you are doing. My husband and I have both had careers in finance and thought we knew all there was to know about creating a financially secure future. However, at the urging of a friend who seem to be doing retirement well we saw a financial planner last year, who gave us so much more insight into superannuation and the third stage of our lives. I was also an early reader of your book, and found that to be so useful in thinking about the other pillars of an epic retirement that aren’t just financial.
As a consequence, at age 60, we have just started our 15 month gap year. After a month, here we plan to travel to Western Australia for a month, a month in Vietnam, then to Europe to do a long walk across France. After that who knows? We have rented out our house in Sydney, and expect to need very little from our superannuation to supplement our expenses. I realise this is a very fortunate position to be in, but it may be something for you and your team to think about, under the banner of Gap Years for Third Stagers.
Kind regards, Maria
Hi Maria. You go girl! What wonderful prime timers and epic retirees you are. I’m so pleased for you (and heaps jealous!). And you’re living proof that in all reality, everyone needs a bit of advice to navigate retirement well. They also need to take charge and build their own vision, and understand more than just their money! Gap years for third stagers is something I want to talk much more about. Heck I want to have one one day. In the meantime - I want to hear all about yours and see the pics (the pic didnt come through). Bec Xx
I’m getting permission to post their pics over on my Instagram page here and my Facebook too. If you have stories to tell like this (with or without pictures) please send them in and give me permission to put them on the newsletter and/or Insta and Facebook with some epic vibe - please. You might just inspire a country full of others to live a more epic retirement!
Dont forget to send me your letters (and pics!) - just reply to this email or email me at firstname.lastname@example.org.