Approaching 66 -70? Key decision-making time

This is the second part of a two-part article which defines the key decisions you will face as you move through your 60s. Last week Gary pointed out that 65 is not Age Pension age – he is, of course, correct – but we are recommending you consider key trigger points in retirement at least a year or two in advance so that you have time to maximise the outcome. Change is inevitable in our lives. Most of us feel better if we seize control and enjoy the upsides of change rather than just have it happen to us. This is particularly apposite when it comes to retirement income. It’s both possible, and powerful to plan ahead, putting things in place so that you retain as much control as possible.

So what happens when you turn 66? 
And which options present themselves?

You will be one year out from Age Pension entitlement age of 67. But this does not make 67 an ‘official’ retirement age. There is no such thing. It’s just the age at which you can apply if you wish.

If you haven’t already done so, the first obvious action is to check if you are eligible. This is easily done by using the free Retirement Essentials Age Pension Eligibility Calculator. 

This means you can then count the income from this source either in or out for the next short while.

What do you need and want?

Regardless of the result, it’s helpful to set a few hours aside to review your current situation, including your work, main relationships, where you live, your income options. Are you happy with the current mix or do you have plans to change any of these parts of your life? Let’s assume you are more than happy with the status quo, then the fact that you can apply for an Age Pension doesn’t necessarily mean that you should. There  is no reason not to continue with your current form/s of income. But it’s important that you do so, having factored in:

• Your current (and likely) future household expenditure needs
• Plans to stay in your current dwelling or to move
• The state of your health
• Any need to reduce or clear debt
• One-off expenses, including travel plans
• Intended financial gifts or loans.

This is quite a comprehensive list, but there’s a reason for that. To stay in control of your finances requires knowing that you can cover all the above needs or wants. Each and every one of the above will have an impact on your retirement income and it’s important to consider all competing demands so that your decision-making is wholistic. No one has a crystal ball, but using the Retirement Essentials Retirement Forecaster tool can reveal how you can fund yourself over the long haul. As you are now past 65 you can access your super as and when you wish, even if you are still working. But some ways of using super are more tax-effective than others. And lump sum withdrawals can affect your pension eligibility, so it’s important to factor this in before making any irreversible decisions.

Deciding to apply for the Age Pension

Let’s say you have just turned 66, you’ve checked and believe you are eligible for an Age Pension at 67, providing you cut back on work. What else do you need to know or think about? The following points are not comprehensive, but do offer a starting checklist:

• Don’t delay. You can apply up to 13-weeks before which means you receive any Age Pension entitlements as soon as possible.
• You will need to apply as a couple or a single. If you are a couple your joint assets are assessed. But if you have a younger spouse whose super is in accumulation mode you may be able to use the ‘younger spouse’ rules to your advantage.
• Age Pension eligibility means you need to comply with age and residency rules as well as pass the income and assets tests
• Money that you have gifted or loaned may affect your entitlements.
• The work bonus is applied to income earned through employment, as opposed to other forms of income. Understanding how it is applied is important.
• Financial assets are also ‘deemed’ to earn income. Here’s an explanation of how this works.

How long will your application take?

Theoretically your Age Pension application should be processed within three months and back paid to the date of your application. But wait times have blown out substantially and you may wait much longer. If you make any errors in your application or documentation, your application may need to be resubmitted and your backdating will only be applied to the second submission. Make sure that you have everything in order before uploading or lodging your information with the local Centrelink office.

What next?

While the Age Pension is a Federal Government-guaranteed safety net, your entitlements are not set in stone. As your circumstances (or the broader economy) change, you may be entitled to higher, lower or zero payments. Your obligation is to inform Centrelink within 14 days of any changes to your situation. And remember, there are always ways to work within the rules to ensure, regardless of changes, that your entitlements are maximised.

And finally, while health was mentioned in passing at the beginning of this article, it remains the area over which you retain the most control. Every day you have the opportunity to put your own health first. Are you doing this? If not, maybe it’s time to ask yourself why? 

Five ways Retirement Essentials assists members to maximise their retirement income:

• Free Age Pension Eligibility Calculator
• Age Pension consultation and application support 
• Maximising your Age Pension entitlements assistance
• Better understanding your super to ensure it’s working as hard as it can be
• Guided use of the Retirement Forecaster tool

Are you in your late 60s? 

What advice would you give to other members who are encountering this decision-making time?