The ageing of our population is changing the way we approach retirement. Almost three-quarters of workers aged between 50 and 74 are optimistic about remaining in the workforce and there are good reasons to stay on at the coalface for longer.
The 2015 Older Workers Report by the Commonwealth Bank and Financial Services Council, found financial security is the main reason older Australians are keen to keep working. Along with a regular pay cheque, delaying retirement means more money going into super through employer contributions, and less time drawing down the funds, so your final nest egg can be considerably larger.
Thankfully, the same report found discrimination towards older workers is on the decline. Nonetheless, many people find that ill health—either their own or that of a family member—is the thing that unexpectedly cuts short their working life. None of us knows what lies around the corner and even if you would like to keep working into your seventies it pays to have plans in place for retirement.
One advantage older workers often have over their younger colleagues is more disposable cash to invest. With the kids grown up and the mortgage paid off (or close to it) you may be in a position to make additional contributions to super either through salary sacrifice or from your own pocket.
If you decide to wind down your working week from full-time to part-time, your super can also be used to supplement employment income. Once we reach preservation age (between 55 and 60 depending on when you were born) super savings can be accessed through a transition to retirement pension (TRP).
A TRP provides regular payments from super while you continue working. The money cannot be accessed as a lump sum and you’re limited to a maximum withdrawal of 10 per cent of your super savings each year.
These conditions may sound restrictive but they help to ensure you’ll still have some super savings left when you eventually hang up your work boots for good. That said, dipping into super at an early stage can mean having far less to retire on further down the track. That makes good financial advice essential for determining whether a TRP is the best option for your circumstances.
Paul Clitheroe is a founding director of financial planning firm ipac, Chairman of the Australian Government Financial Literacy Board and chief commentator for Money Magazine.