Just having hit a significant milestone myself (70), I’m reminded of how important some milestones are in retirement. Milestones make you think about important life stages. But beyond that, government policy relies on age markers for when rules change or benefits kick in.
So, let’s look at the most important milestones, starting with the youngsters among our readers.
At 55
You become eligible to make “Downsizer” contributions to super. This allows you to take up to $300,000 from the sale of the home (or $600,000 for a couple) and contribute it to super. That can be a great way to top up super before you retire in order to get a higher retirement income. You may want to get a retirement forecast and advice to understand whether this will work for you. And of course you need to pay careful attention to the rules.
Turning 60
Reaching age 60 is a huge milestone for super. It’s the start of tax free access to super as you’ve reached your Preservation Age. Two new options are available:
Tax-Free Super Withdrawals. Once you turn 60 and retire, you can access your superannuation without paying any tax on withdrawals. This applies to both lump sums and income streams (such as an Account-Based Pension). Many people struggle to understand what they should do with their super at this stage of their life.
Transition to Retirement (TTR) Pension: When you reach 60 you might want to cut back on work and top up your income from your super. If you start a TTR pension with a taxed super fund (the most common type of fund) at 60, your income payments are tax-free.
Turning 60 is also often a big motivational ‘kick in the pants’ – a reminder that retirement is likely coming fairly soon. If you haven’t really got your retirement thinking going, now’s the time to start getting ready and to take advantage of the opportunities you have to prepare, like by topping up super to the extent you can or paying off the mortgage. Or to get ready for the Age Pension. There are lots of things you can do at this stage which will help you later on.
In their early 60s many people stop working. Many retire voluntarily but there are surprisingly large numbers who find that health or job changes force an earlier retirement. So, it pays to be prepared.
More good news at 65
At 65, the government no longer requires you to retire or satisfy any special conditions to get full access to your super savings e.g. it doesn’t matter if you are still working. Also, at this age, if you’ve got a Transition to Retirement Pension it automatically converts to an Account Based Pension. This has the added advantage of all the investment earnings being tax free as well as the income payments. Instead of converting it into an Account Based Pension you do have the option to transfer it back into an accumulation account and stop receiving ongoing payments.
Hitting 67
When you hit age 67 you become eligible to apply for the Age Pension. As this can be worth over $1 million dollars over your lifetime, it’s like a huge birthday cake from the government.
You can actually apply for the Age Pension 13 weeks before you turn 67, so we recommend people start work on it at least 13 weeks ahead of their 67th birthday. Check your eligibility is the first thing to do on our free calculator. It turns out that if you’re not immediately eligible for the Age Pension, you’re very likely to be eligible at 67 for the Commonwealth Seniors Health Card and that’s worth thousands per year.
Most important thing: don’t be late applying! We find over 50% of people apply late and it costs them big time. There’s no back pay on the Age Pension. There’s plenty of reasons people apply late but they are all avoidable excuses. It’s complex; that’s why we offer a series of ways to help you, from our free calculator, to entitlements consultations, to our concierge service helping you apply for the Age Pension or the Commonwealth Seniors Health Card.
As couples rarely hit Age Pension age at the same time, it pays to think through the implications. If you have a younger partner, there’s often Age Pension benefits to be gained by thinking through how super is shared between the partners. Talk to one of our advisers for more information.
From 67 there are some limitations on deductible contributions. If you’re aged 67 to 74 (at the time of the contribution) and want to claim a tax deduction on that contribution, you must first satisfy work test requirements. Under the work test you must have worked at least 40 hours over 30 consecutive days in the financial year.
Many people are still working at this age. Often that makes them ineligible for the Age Pension. Depending on their circumstances they may find the added benefit from work income, reducing the Age Pension benefit, means they don’t get much added financial benefit from working. Getting a forecast as to how your work income will combine with your Age Pension can help you to better understand your situation.
When you turn 75
After age 75, you generally can’t make voluntary super contributions unless they are mandated employer contributions (such as Superannuation Guarantee contributions). Downsizer contributions are still allowed (up to $300,000 per person).
Keeping a focus on your milestones can help you understand and make the most out of your super and Age Pension entitlements. You don’t have to remember it all or know all the rules. You just need to know where to go to get the help you need.
Well at least mine was, Pension applications are back dated
Michal
I think they are backdated to the date that the application was started; not to the date that the person became eligible.
Example: I turned 67 in Jan 2022. I began application in mid-March 2022. Due to some complexities related to ongoing self-employment, it took some weeks to get all my details onto the application. I lodged it in early May 2022.
When the assessment was completed and I was granted the pension, it was back-paid to mid March when the application began, not to January when I became eligible. So in effect I cost myself Jan-mid March payments, about $4300.
I think the author meant not backdated to age 67. It is backdated to the date of application. Hence the encouragement to apply early. ?
Hi David that is correct. The Age Pension is back paid to the day you lodged the claim or the day you turned 67, whichever is the latter. The key point trying to be articulated is if you apply at age 70 there is no back pay for the 3 years since you turned 67.
I think the point is, people actually delay the application process. So people who were eligible to apply earlier, delay the application. Yes payments are backdated to the date of application, not to the date you were eligible to apply. Please correct me if I’m wrong.
Hi whilst on Disabilty pension
I am aged 65. how much Super can I have before it effects my pension?
Hi Ange, we specialise in the Age Pension and Commonwealth Seniors Health Card so am unsure what the rules are for Disability Pension.
My Husband is retiring in July next year he will be 67 years & 6months ..question if he applies for age pension 13 weeks before retiring he will have his salary so does he need to wait until he retires to apply for the age pension to get the best benefit or will the take into account that his income will cease once he retires .. would a letter from employer help him to be able to apply 13 weeks earlier
Hi Leslie, you can lodge the claim 13 weeks prior to the retirement date so long as it is set in stone. Should work make him an offer he can’t refuse and stays on extra then the claim will rightly be declined as being lodged more then 13 weeks prior to becoming eligible. Please also note that he would only receive pension payments from the date of retirement onward as that is when he becomes eligible, not the date the claim is lodged. Lastly, it is likely Centrelink will review the claim within that 13 week period and will rightly decline it based on his income however, you would then lodge and appeal once he had retired with the separation certificate as evidence of the reduced income and then Centrelink will approve it. Centrelink does not do anything in advance and will not approve the claim until he has definitely ceased earning that income.
Hitting 67
Hi,
“As this can be worth over $1 million dollars over your lifetime, it’s like a huge birthday cake from the government.” Big Statement
Hardley a birthday cake from the government, the majority of pensioners have worked long and hard to receive a pittance back.