“I am 61 and will soon be made redundant. If I pay off my mortgage, can I retire early or can I still work 3 days a week and receive pension from my superannuation?"
-Question from Tony in Yarraville, VIC
Top answer provided by:
Joel Edelman
Hi Tony,
Thank you for your question.
Whilst each question has a short technical response, there are several considerations that affect how you move forward.
We have an opportunity to provide general information to address your questions, thereafter I would suggest seeking specific advice to address your goals and personal situation.
The Question
"If I pay off my mortgage, can I retire early’’?
Yes, you can retire early!
Retirement is not a factor of any Government rule or regulation, but rather a situation when you choose to no longer look for work and intend to cover the cost of living needs from sources other than work.
There are a number of considerations to think about prior to retirement.
1. Considerations when setting your retirement date!
Whilst you can retire early, what do you want retirement to look like?
Do you intend to maintain the same lifestyle you enjoyed prior to retirement?
-For how long should cash flows continue?
What are the cash flows needed to meet your anticipated living standards and goals?
Do you have a source of passive income?
-Passive income may be from investments in various ownership structures or vehicles like a superannuation fund, investment companies or trust structures.
-The investment structure may receive dividend income from a private or publicly listed company, rental income or interest from cash type investments like a term deposit etc.
Does the passive income cover your lifestyle needs for the entire duration of your retirement, or do you intend to sell the assets to cover some of your living costs?
Consider asset draw down and potential changes in your circumstances or impact on goals.
-E.g. downsizing your home, inheritance.
Would the Centrelink age pension provide sufficient income to meet your lifestyle needs?
The Association of Superannuation funds of Australia (ASFA) releases research on retirement income needs.
ASFA reported budgets for various households and living standards for those aged 65-84 (September quarter 2022)
2. The Second Question
“Can I still work 3 days a week and receive pension from my superannuation’’.
The good news is that you can.
The superannuation rules provide for access based on meeting a condition of release.
Meeting a condition of release to access super:
-Has reached their preservation age and retires
-Has reached their preservation age and begins a transition-to-retirement income stream
-Ceases an employment arrangement on or after the age of 60
-Is 65 years old (even if they haven't retired)
As you are over 60 and intend to continue to work 3 days per week, the rules allow for access to super during this transitionary period through a transition to retirement pension as a tax-free income.
Until the age of 65 the minimum drawing would be 4% of your account balance each year and up to a maximum of 10%. After age 65 or once you retire fully, your transition to retirement can be changed into an account-based pension with full access to your super.
I hope this response provides the guidance and general information to now seek the advice and coaching to make your retirement successful and rewarding.
Best of luck in your transition to retirement and future years basking in the reward of your hard work.
Kind regards,
Joel Edelman
While the Adviser Ratings Website facilitates the question and answer functionality, all such communications are between users and authorised financial advisers, of which Adviser Ratings has no affiliation. Adviser Ratings is not the advice provider and does not provide financial product advice and only provides information that is general in nature.
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