Should Craig retire completely or go part-time?

Nicole answers Craig’s dilemma

This week we talk to adviser, Nicole Bell, who spends her time working with Retirement Essentials members to help them get better financial outcomes. She recently spent time with Craig, who is 69, currently working full-time, but wanting to spend more time with his new partner, Yuna. Nicole was able to share a solution for Craig that ticked all the boxes. But more about that later.

We asked Nicole what she enjoys most about her role as a financial adviser. And like her Retirement Essentials colleagues, Steven, Megan and Sharon, she loves the fact that her clients walk away feeling relieved, reassured and more confident about their financial futures.

‘It’s usually not about any single strategy, more about how much better they feel after asking their questions and better understanding the rules. They know what they need to do next. And don’t feel so overwhelmed. I love the fact that every client is different. But funnily enough, every week I have at least one repeat client who may be early in their retirement journey. They are often talking one year out from retiring, keen to keep an eye on changing rules.

‘One client has had a series of five appointments. Her husband was unwell and they both wanted me to demonstrate how she could manage her income if she needed to do so as a single. Sadly her husband did pass away, and she was able to come back and work through various issues over the next 12 months or so, comfortable that someone knew her situation and cared enough to provide ongoing support. She has since become very adept at her own financial administration, which is really pleasing’.

But back to Craig whose question was relatively straightforward: 

Should I retire completely or work part time?

Often clients think about their retirement date as the day when they can pull the plug completely. Wednesday they are working full-time at the coalface, Thursday they’re done and dusted. But is this really the best option for everyone? 

Before we think about your financial needs and options, it’s more important to consider whether you still like working. And if so, how much?  If you’re retiring just because you believe that you have reached that  ‘time’ (often reaching Age Pension age or 65), or because five days a week is getting a little hard to physically sustain, or just because you’ve reached Age Pension age and want to get some support from the pension, then it may be worth thinking about semi-retirement instead. 

Whatever your reason to step back, it’s important to know it doesn’t have to be all or nothing. You would be surprised how many people don’t even consider casual or part time work as an option for the future, but once the idea is planted it can take root. There are a lot of advantages to semi-retiring, and it’s not just the salary!

Yes, ongoing work income can definitely help. The first fortnight after retirement, when that wage doesn’t come into your bank account, is a lot tougher than many retirees anticipate. Moving forward on a lower income, but still an income, can definitely help financial anxiety around this time. Depending on your financial position, semi-retirement may also be a more realistic and sustainable option to help your wealth last the distance.

There are also the psycho-social and health benefits of considering semi-retirement. Recent research has found that people who worked past 65 were about three times more likely to report being in good health, and about half as likely to have serious health problems, such as cancer or heart disease. 

Now, what about your Age Pension eligibility? This is the main question which Retirement Essentials is asked about when it comes to continuing to work past 67. Thankfully, Australia’s social welfare system is designed to help encourage retirees to continue working, through the Work Bonus scheme and generous income limits for part Age Pension eligibility.

All these considerations were canvased when Nicole worked with Craig last week. He’s 69 and has a new partner and is keen to spend more time with her.  His initial understanding was that he needed to fully retire to claim the Age Pension. But he didn’t really want to. He still gets a lot of satisfaction from his job, and really enjoys the company of his colleagues. He’s just getting tired of getting up at 7am five days a week and getting home late. 

Nicole was able to help Craig work through his other options, including working part time. Now it obviously depends on what his employer is willing to offer, but here is where they landed.

Craig is currently working full-time earning $80,000 per annum.

His partner Yuna works part-time and earns $15,600. Their combined super is $450,000, and they have savings of $50,000. If Craig cuts back to 50% work (18 hours a week) he decreases his gross employment income by $40,000.

BUT…

…their combined Age Pension eligibility is now $26,000 per year plus Pension Concession Cards. Craig did not qualify for any Age Pension while he was working full time due to income limits, but he did qualify for a Commonwealth Seniors Health Card. Nicole’s projections show that he can keep working half the time and their household income reduces by only $14,000, meanwhile their household bills are reduced significantly through pensioner concessions.

Many of our members are surprised when they work through their earnings and entitlements as Craig and Yuna did with Nicole. It can lead to great outcomes and the confidence to make exciting life changes based upon secure income projections.

If you’re unsure about your own retirement income prospects, and what you may be entitled to, the Retirement Essentials advisers can help you understand your situation in more detail. This includes looking at both the short and the long term together, to help you form a plan to enjoy semi-retirement with confidence that you’ll have what you need one of these three guided consultations might work well for you:

Retirement Forecasting (Compare two scenarios of  how your assets and income will look during your retirement journey).
Understanding more about super (Assess the options to help make your super work better for you).
Maximising your entitlements (Assess any changes you might be able to make to maximise your Centrelink entitlements)