With increasing life expectancy and shifting financial goals, many Australians are choosing to continue working beyond the age of 70.
Whether for financial security, personal fulfilment, or social engagement, part-time work in retirement can offer numerous benefits.
However, this choice also brings complexities, especially around superannuation contributions, access to the Age Pension, and the structure of employment, whether self-employed or working for an employer.
Contributions to Superannuation
While retirement traditionally marked the end of superannuation contributions, today’s retirees may continue growing their super if they are still working. The ability to contribute, however, depends on individual eligibility and contribution rules. Working Australians over 70 can continue to benefit from employer contributions (such as the Superannuation Guarantee) if they are employed, and may also be eligible to make personal contributions within certain limits and conditions. Self-employed retirees, on the other hand, must take a more active role in managing their super, including deciding if and how to make voluntary contributions.
Super remains an important vehicle for building or preserving wealth due to its favourable tax treatment, even in later stages of life. For many, the aim is to balance ongoing contributions with drawing a sustainable income in retirement.
Potential to Receive a Part Age Pension
Continuing to work part-time may not disqualify a retiree from receiving a part Age Pension. The Australian government allows for a certain level of income and assets before it starts reducing pension entitlements. Many retirees working three to four days a week find they remain eligible for at least a part pension, which can help supplement their income. However, these entitlements are assessed regularly, and changes in income can affect payments, so staying informed and regularly reviewing your situation is crucial.
Pros and Cons of Working 3–4 Days a Week After 70
Pros:
- Financial Benefits: Continued income reduces the need to draw down on retirement savings, preserving superannuation balances for longer and potentially improving long-term financial security.
- Social and Mental Engagement: Regular work provides structure, purpose, and social interaction, which can be vital to mental and emotional well-being.
- Skills and Experience: Retirees bring a wealth of knowledge to the workforce, often serving as mentors or offering specialised expertise.
- Flexibility: Part-time work allows for a more manageable balance between work and leisure, travel, or family commitments.
- Health Benefits: Staying active and engaged through work can positively influence physical and mental health.
Cons:
- Tax and Pension Interactions: Additional income might affect your Age Pension and could introduce more complexity into your financial situation.
- Reduced Leisure Time: Working multiple days a week may limit the freedom many associate with retirement.
- Physical Limitations: Depending on the nature of the job, continuing to work can become physically demanding with age.
- Workplace Adjustment: Some workplaces may not be geared towards older workers or may lack flexibility, leading to stress or reduced job satisfaction.
- Ongoing Superannuation Management: Navigating the rules around super contributions and withdrawals post-70 can be complex and requires regular monitoring.
Employment Structure: Self-Employed vs. Employed
Whether you’re self-employed or working for an employer significantly affects how your super is managed and what support systems are in place.
- Employed: If you are working for an employer, they are generally obligated to make Superannuation Guarantee contributions. This provides a steady pathway for continued super growth without requiring much direct management from the employee.
- Self-Employed: You must manage your own super contributions and tax obligations. While this provides flexibility, it requires greater financial literacy and ongoing planning. There are no mandatory contributions, so proactive strategy is essential.
Both paths offer opportunities, but each requires different planning strategies. In all cases, it’s essential to understand the impact on your tax position, pension eligibility, and long-term retirement goals.
The Importance of Financial Advice
Given the potential complexity of working past 70—particularly in areas such as superannuation contributions, pension eligibility, and tax implications—it is highly advisable to speak with a qualified financial adviser. A professional can help develop a plan tailored to your individual goals, work status, and financial situation.
Top 5 Questions to Ask Your Financial Adviser
- How will working part-time affect my Age Pension entitlements and tax position?
- Can I continue contributing to superannuation, and what types of contributions should I consider?
- What are the pros and cons of being self-employed versus working for an employer at my age?
- How can I manage my income and withdrawals to make my retirement savings last?
- What strategies can I use to balance my lifestyle goals with financial security in later life?
Ultimately, working beyond the age of 70 can be a rewarding and financially prudent decision for many retirees. However, it requires thoughtful planning, a clear understanding of the rules, and regular professional guidance to ensure it supports both your short-term lifestyle and long-term security.
If this article has inspired you to think about your unique situation and, more importantly, what you and your family are going through right now, please get in touch with your advice professional.
This information does not consider any person’s objectives, financial situation, or needs. Before making a decision, you should consider whether it is appropriate in light of your particular objectives, financial situation, or needs.
(Feedsy Exclusive)