One of the major myths about retirees is that they don’t work.
This is the opposite of what’s really happening.
Many retirees are still in the paid work force, albeit working fewer hours.
Just as many others are beavering away doing volunteer work. In fact It’s estimated that volunteers contribute a combined additional $16 Billion to Australia’s annual GDP every year. Sadly, it’s actually not included in the national accounts. Maybe it’s about time we recognised this?
The myth about retirees stopping work fully is especially prevalent when it comes to those on an Age Pension. Even some pensioners believe they are not allowed to work. It certainly seems to be discouraged which is strange when more workers are needed.
That’s incorrect, of course, you can work and earn up to a certain amount before this income affects any pension entitlement.
So what else do we need to know about the fifth pillar of retirement income – wages?
Who is most likely to work in retirement?
Whether you work or not after retiring depends a lot upon your reason for retirement and your previous calling. It is estimated that up to 30% of people retire due to ill health or retrenchment, so it is likely that these retirees are less likely to re-enter the workforce, particularly those with health issues. According to the 2020 Retirement Income Review (RIR), lower income retirees are less likely to work while the highest socio economic decile (10%) earns around 16% of its retirement income from work-related activities. There are many factors influencing these different scenarios – less work income might be due to reasons of accessibility, physical health, how much physical labour is required, skill levels and whether you were or are self employed.
Times have changed. Retirement is no longer a full stop, rather a change in direction and activities. As previously reported, a recent National Seniors Association (NSA) survey of Age Pensioners reveals that at least 20% (half a million people) would happily head back to work if they could get work and it didn’t reduce their entitlements. Meanwhile the Australian Bureau of Statistics (ABS) reports a 12% increase in employment for those aged 65 or over.
How much can you earn?
The 30% or so of retirees who are self-funded can earn as much as they please, although it could affect their eligibility for the Commonwealth Seniors Health Card.
The remaining 70% who are on a full or part Age Pension are not so lucky. They are subject to the Pension Work Bonus rules.
Briefly, you may earn up to $7800 per year or $300 per fortnight. This amount is applied for singles, and individually to couples (i.e. $7800 each). If you do not use all the bonus in one financial year, you can carry it forward to the next year. But it cannot exceed the maximum amount of $7800 at any time. The work bonus is applied to your income, and any income over and above this amount will have the income test applied, essentially reducing pension entitlements by 50c for every dollar earned above the bonus amount.
Is this fair?
There is a lot of lobbying at the moment for a review of the Age Pension income threshold. There are a few reasons. Australia is currently suffering from a severe skills shortage, particularly in service industries including health and aged care. The majority of retirees are penalised if they work more than a few hours a week. Work participation is a good health indicator for people of any age. So there’s a lot to recommend an easing of these rules. As we said in our Budget 2022 coverage, the disincentives for some older Australians to work hurt us all.
But why not let one of our members, Sandra, summarise this issue in very practical terms?
A few weeks ago Sandra made this comment on our Workers Needed article
Earning from a job whilst getting the Age Pension is a bit of a joke. Sure, there is the Work Bonus but for places like Woolworths, you must work a minimum of 10 hours a week. Which at minimum is $226, being more than the $150 Services Australia allows. And being a ‘second’ source of income (because the Age Pension is taxable too), the tax taken out is higher, no tax exemption for the job. The double whammy – for every dollar over the $150 each week, I also lose pension dollars. So why work? At the moment, because I can, because hubby can’t retire just yet and has medical needs, and I enjoy the social interaction aspect of it. But when hubby and I are both retired, then we’ll need to reconsider if I should work, considering the loss of pension AND the higher taxes paid. I’m not interested in working just to replace what I’m losing because I work.
Should you care?
As you are no doubt aware, work is about so much more than money. But let’s start with the money first. Rankings from the Organisation of Economic Development (OECD) place Australian pensioners in the third worst in the world when it comes to how much pension they are paid. Separately, the Australian Council of Social Services (ACOSS) research reveals that a concerning number (one third) of pensioners are living in poverty. So breaking out of the poverty cycle by doing paid work, if you are able, without jeopardising your entitlements isn’t just going to mean more money. It can lead to better nutrition, housing, an increased sense of purpose and a break in isolation for those living alone. There’s a lot to like about work.
And then there is the research, which confirms its value – most recently from the University of Western Australia’s Life Course Centre, which confirmed that, as well as financial health, physical and mental health and participation all benefited, with an overall increase in working participants’ life satisfaction.
How does this affect you today?
Depending upon whether you are currently on, or hope to receive, a full or part Age Pension, it may be worth checking in with our team as to how work income could affect your current entitlements and find out what is the best solution for your specific situation? One-off consultations are private, affordable and offer expert feedback on all aspects of the Age Pension and related retirement income.
Australian politisions making sure that pensioners living in poverty , that’s for sure.
If pensioners can work they can have extra money and government have tax money so everyone is happy.
yep if we can see that why cant they is a win win for every one tax to the economy and less poor pensioners if they can work i cant see why they dont what us to make some money above the pension they must think we are so well of on the hand out they give us
Hi for I am Michael Patterson I applied for the pension and they gave it to me then took it to after six weeks they said my wife and I earned to much and I don,t even get A pension card i am 72 I work 4 days A week my wife works part time we both work in age care and don,t earn all that much
My husband is 74 he retired 9 years ago I am just turned 61 when my husband retired I was working 10 hours a week earning $225 I enjoyed my job but Centrelink took $115 dollars away from my husband’s pension because of my earnings.
We are classed as a couple.
What incentive was there for me to keep working effectively for only $110 a week.
I am 71 still works 15 hours per week. My net income is $831 pf. My pension is $ 459.85 pf and me missus $ 454.17. If we both on full pension and quit my job we both will get $ 1547.60 pf.
So our total income by working is: $1744
If I quit my job: $ 1547.60
Technically we receive $ 196 more or $ 6.55 net per hour by me working so like Maggie above is it worth to drive to work and spending $2 fuel per day
my wife and I still work, I work 3 out of 4 weeks a month and have to report our income every fortnight so every 2nd fortnight I get a few dollars but I do have a pension card and get cheap medications. My job finishes at the end of June am I better to share my wife’s job or just get the pension and declare only 1 income ?
Hi Peter. There are a number of factors to consider here including the work bonus and whether your wife is employed or in her own business. All income needs to be declared to Centrelink but whether the income is in your name or your wife’s depends on your circumstances. It might be useful to book a consultation to get more help with this.
My husband is retired and because of how much I earn in my fulltime job, he receives a little over $100/fn. He picks up a little work on a very ad hoc basis–in a good week he could earn up to $700, but then may go weeks without any more work. He has an ABN but doesn’t make enough to charge GST, etc. From what I have seen on the Centrelink site when reporting his income each fortnight, he doesn’t have to report any income he makes from these little jobs as he is not “employed”. Is this correct or am I misunderstanding the information on the Centrelink site?
Hi Ruth, thanks for reaching out! When you are self-employed reporting income is a little different. The best way to declare any earnings is to lodge a Profit & Loss statement(P&L). Centrelink have a TEMPLATE you can use if you do not already have one. Given the ad hoc nature of your husband’s work we suggest he lodges a P&L whenever he receives any income.
There is nothing like earning some extra money and then doing your job for 1/2 the price because of what you lose. So instead of being a help with the worker shortage, I may as well stay home. But I enjoy going out and interacting with people.