“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:
Tim Brown
Hi Tony,
Great question and thank you for reaching out to Adviser Ratings.
I will break your question down into 2 parts.
If I pay off my mortgage, can I retire early?
You can retire at any time you want in life, but it comes down to the lifestyle you want to live in retirement.
The Association of Superannuation Funds of Australia (ASFA) provide a quarterly report on the amount an individual or couple need to live a comfortable or modest lifestyle as per below:
-An individual requires $48,266pa for a comfortable lifestyle and $30,582 for a modest lifestyle.
-A couple requires $68,014pa for a comfortable lifestyle and $44,043 for a modest lifestyle.
This is just a guide as you can spend any amount of money in retirement, but it will depend on the level of financial investments that you have at retirement and your risk tolerance that will determine whether these investments see you through to life expectancy and beyond based on your income and lifestyle goals.
This is a great opportunity for you to sit down with a Financial Adviser to understand your ability to retire now at 61 years old. Make sure you sit down and do a budget that will enable you to live a comfortable retirement based on your standards, and make note of your lifestyle goals that you want to tick off in retirement which may include the following:
-Upgrading your motor vehicle
-Purchasing a caravan
-Travelling overseas and flying premium economy or business class
-Travelling domestically
-Helping out family financially
Your Financial Adviser should be able to project out the next 30+ years to see if it is possible for you to retire now at 61 years old based on your goals. In some instances, your Financial Adviser will need to have a trade-off conversation with you as projections may show that your financial investments will run out before life expectancy (87 years old for a male and 89 for a female) plus 5 years. These trade-off discussions may include:
-Reducing your spending in retirement
-Flying economy instead of business class on your overseas travel
-Moving you to a higher risk profile to see your financial investment work harder for you in retirement with the understanding that you are comfortable to see greater levels of short-term volatility within your retirement assets
-Returning to work for a period of time to enable you to continue to build on your retirement assets.
I am 61 and will soon be made redundant. Can I still work 3 days a week and receive a pension from my superannuation?
The simple answer is YES.
If you are aged between 60 and 64 and you cease an employment arrangement, then you are entitled to access all benefits accrued up until that point in time. You can then rollover your superannuation from the accumulation phase to an allocated pension and start drawing a regular income stream. The benefits of setting up an allocated pension under this condition of release is that all pension payments, lump-sum withdrawals and investment earnings are tax-free.
If you then decide to work 3 days per week with a new employer, you cannot access any benefits which you accrue after this point in time until you again cease employment or turn 65 years old, whichever comes first.
Summary
A lot of Australians believe that you have to work until 65 years old or when you become eligible for Age Pension. This is NOT TRUE. You can retire whenever you want, but you need to make sure that you have the financial investments to support your goals up until life expectancy plus 5 years. This is why a discussion with a Financial Adviser could open your eyes up to an early retirement which is everyone’s dream.
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.
Article by:
Comments0