When the unexpected happens
There is never a good time – or age – to be out of work. But for those over 60, it can feel particularly painful.
If you have lost a job or been made redundant, the hardest part is knowing what to do next.
You might feel tempted to take the plunge and start your retirement earlier than planned.
Or simply freshen up your CV and get back into the job market as quickly as possible.
The most important thing you can do is take a moment to review your current financial situation. And get the right advice on how to best adjust your retirement plan. That way you can be confident your next step is a smart one.
Do you have enough to retire?
The first question to ask yourself is: “Do I have enough funds to retire now?” And be honest.
Determining how much you need can help you decide how best to approach your situation. A professional adviser can walk you through financial projections which will show how long your money is likely to last.
This will provide you with a clear understanding of your current position… and once you are armed with this information you can select your next steps.
If you don’t have enough to support the retirement lifestyle you had planned, then you need to consider re-entering the workforce. Or alternatively, if returning to work is not an option, you could reassess your retirement spending and lifestyle expectations… only you can decide whether the trade-off would be worthwhile.
Working after 60
If you had planned on working longer to save more towards your retirement, you might not need to earn as much money as you did in your last role. By reviewing your finances, you could consider taking on part-time or casual work.
Or broaden your search to consider how your skill set can be used in other industries or workplaces. Being flexible will put you at an advantage to others looking for work and could help you to find something sooner.
The process of finding a new job can seem difficult and daunting. But staying confident in your skills and years of experience means you can be very desirable to employers.
You also possess something most younger workers don’t yet have. A broad and deep network. By simply reaching out to past colleagues and employers, you can proactively position yourself and seek work that isn’t being advertised.
Adding to your retirement savings
Best of all, staying in work, even part-time or casually, means you can keep contributing to your retirement savings.
You can make concessional (before-tax) super contributions up to $25,000 per year or non-concessional (after-tax) super contributions up to $100,000 per year. Depending on your age you may be able to carry this amount forward.
Once you reach 67 you can only make non-concessional contributions if you satisfy a work test or the one-off work test exemption in the financial year in which the contribution is made.
However, it must also be noted that if you have over $1.6 million already saved in your superannuation fund or self-managed super fund (SMSF), you are unable to make non-concessional contributions regardless of your work status.
Accessing your super benefits
Before you get tempted to access your superannuation benefits there are few things to know.
You can withdraw from your superannuation fund or SMSF after you turn 65, even if you are still working. If you retire before you turn 65, you can only access your super when you reach ‘preservation age’ and this is based on when you were born.
Super benefits can be paid as a super income stream, super lump sum or a combination of the two.
The advantage of choosing a super income stream or ‘pension’ is that it is not added to your assessable income if you are still working, or have other sources of income. Plus, once you start drawing a pension from your super, any earnings made by the fund are tax free… rather than the 15% incurred during the accumulation phase. There are a couple of exceptions to this rule, so speaking with an adviser is recommended.
Don’t lose sight of your retirement plan
You’ve worked hard for years, paid down debt, saved and invested along the way.
If you find yourself in an unexpected situation the team at First Financial can help you determine what best suits your personal situation.
We are here to answer your questions and provide you with recommendations based on your unique circumstances. We can give advice on how to adjust your retirement plan so that you can stay on track.