The discussion following ‘Is the Age Pension Fair?’ really stirred things up, and quite rightly so. There’s clearly a strong desire amongst older Australians to stay active and boost their income in retirement. Many of you shared your stories, outlining the twists and turns with Centrelink regulations, feeling penalised for having a go, and wanting to keep contributing your valuable skills. This follow-up article focuses on real-life experiences and practical information, particularly for those running their own business.
Understanding the rules
Let’s face it, the Age Pension rules around work and income can be a bit of a maze. Here’s a straightforward breakdown of key points:
- Income test: This test determines how much Age Pension you’re entitled to, based upon your earnings. It takes into account income from various sources, whether you’re employed, running your own business, or have investments. Understanding the income test threshold and how your earnings affect your fortnightly payments is essential for planning ahead.
- Reporting obligations: A key factor when working and receiving an Age Pension is to report income to Centrelink regularly, often fortnightly. Sharing this information accurately – and on time – is crucial to avoid any hassles with overpayments or debts.
- Work Bonus: This initiative is designed to encourage working retirees to keep working, by exempting a certain amount of employment income from the income test. Knowing the details of the Work Bonus, including who’s eligible and how it’s calculated, is key to making it work for you.
Strategies to maximise income
So, given the rules, how can you make the most of your income while still receiving the Age Pension? Here are some practical tips:
- Strategic work choices: Think carefully about the type and amount of work you take on. Part-time work or flexible arrangements can let you earn extra without losing any entitlements.
- Work Bonus utilisation: Make sure you’re getting the most out of the Work Bonus by keeping track of your income from working. Planning your work around the Work Bonus thresholds can help you hold on to more of your fortnightly payments.
- Income smoothing: Where possible, consider ways to even out your income flow. Managing any ups and downs in earnings can help steady your fortnightly payments.
- Accurate record-keeping: Keep good records of your income and report them accurately to Centrelink. This will avoid any slip-ups, prevent overpayments, and make life easier all round.
How the rules affect you
Many members shared their experiences, which really brought things into focus. We had an excellent question from Ian about self-employment in our previous article, Can you still work and get the Age Pension? Ian wanted to know how Centrelink assesses earnings from self-employment, and rightly pointed out that it can vary a lot. For those running their own business, Centrelink looks at things a bit differently to standard employment.
- If you’re self-employed under a contract for services, you might be able to deduct business-related expenses to work out your assessable income.
- However, if you’re under a contract of service, but more like an employee, your gross income is generally assessed without deductions.
- Centrelink also looks at voluntary PAYG agreements, commissions, and whether GST applies.
Good record-keeping of income and expenses is vital for the self-employed who are receiving Age Pension payments.
And we had a great insight from Ian, who is 66, self-employed, and financially comfortable. He loves his work and hopes to continue working past 70 while enjoying a rewarding social life. He refers to his approach as ‘The Rolling Stones Syndrome,’ explaining, “Messrs Jagger, Richard, and Wood are all post-78 yet enjoy their work and playing music…If you are able to continue to work and enjoy it, same thing, keep going!”
That really resonates for those wanting to stay active and engaged through work.
These real-life stories highlight the diverse situations and challenges for working and retirement, particularly those who are self-employed. Clearly, knowing the ropes and planning ahead is key to managing income and Age Pension entitlements.
Advocating for policy changes
Many of you had thoughts on what could be improved. Here are some common points that came up:
- Simplified reporting: Making the reporting requirements simpler would ease the load for everyone, both Age Pension recipients and Centrelink.
- Increased Work Bonus: Boosting the Work Bonus or making it more flexible could give stronger incentives for retirees to keep working.
- Keeping pace: Adjusting the Work Bonus Periodically adjusting the fortnightly Work Bonus to reflect the rising cost of living would ensure that working retirees are not unfairly penalised and that the system remains relevant to current economic conditions. Currently the work bonus isn’t indexed and reviewed the way that the income and assets thresholds are every March and September.
Benefits of working in retirement
Beyond the extra cash, working in retirement has plenty of other perks:
- Staying active: Keeping active through work keeps the mind and body ticking over, which is great for your overall well-being.
- Social engagement: The workplace is a good place for social interaction and a sense of community, which can help beat isolation.
- Sense of purpose: Continuing to work can give you a genuine sense of purpose and contribution, which is important for your self-esteem.
- Skills utilisation: Many retirees have valuable skills and experience to share, which can benefit employers and the wider community.
How We Can Help
Navigating the Age Pension and working in retirement can be tricky. For personalised advice, you can book a Retirement Advice Consultation with one of the experienced Retirement Essentials advisors. Such consultations assist to review your individual situation, uncover tailored strategies, and help you make informed decisions.
What about you?
What hurdles have you faced while working and receiving the Age Pension, especially if you’re self-employed?
Are there any practical tips that you would pass on to others who are thinking about working while on the Age Pension?
