The most common reason retirees return to full or part-time employment is financial necessity, followed closely by boredom1, but there are rules you may need to be aware of depending on your circumstances.
Before we get into it, you generally will have only been able to access your super if you reached your preservation age and retired, ceased an employment arrangement after age 60, or turned 65.
What is your situation?
I reached my preservation age and declared retirement
If you reached your preservation age and declared that you were permanently retired, this would typically have given you unlimited access to your super.
If your personal circumstances have since changed, it is possible for you to return to the workforce, however your intention to retire must have been genuine at the time, which is why your super fund may have asked you to sign a declaration previously stating your intent.
Depending on the super fund, you also may be required to prove your intention was genuine to the Australian Taxation Office.
I ceased an employment arrangement after age 60
From age 60, you can cease an employment arrangement without declaring your retirement and opt to access your super as a lump sum or in periodic payments (which you may receive via an account-based pension).
If you’re in this situation, as there was no intention for you to declare your retirement permanently, you can return to work without any issues.
I’m 65 or older
When you turn 65, you don’t have to be retired or satisfy any special conditions to get full access to your super savings, so regardless of whether you’re accessing super or not, you can return to work.
What happens to your super?
Regardless of which group (above) you fall into, if you have begun drawing a regular income stream from your super savings, you can continue to access your income stream payments irrespective of whether you return to full or part-time employment.
Rules around future contributions
Your employer is broadly required to make super contributions to a fund on your behalf at the rate of 9.5% of your earnings, once you earn more than $450 in a calendar month.
This means you can continue to build your retirement savings via compulsory contributions paid by your employer and or voluntary contributions you make yourself.
However, if you’re age 65 and over, and intend on making voluntary contributions, you must first satisfy a work test requirement, whereby you need to work for a set period of time in the financial year, specifically 40 hours within a 30-day period. Voluntary contributions can’t be made once you turn 75.
Also, keep in mind super rules changed on 1 July 2017, which means:
- Before-tax (concessional) contributions are now capped at $25,000 per annum
- After-tax (non-concessional) contributions are capped at $100,000 per annum
- You can’t make further after-tax contributions once your super balance reaches $1.6 million.
Effects on your Age Pension
If you’re receiving a full or part Age Pension, you’d know that Centrelink conducts an income test and an assets test to determine what you get paid.
Your new employment income will be taken into account as part of this assessment, so make sure you’re aware of whether your earnings could impact your Age Pension entitlements.
Meanwhile, for those eligible for the Work Bonus scheme, the amount you’re able to earn before your pension is reduced may be increased.
Where to go for assistance
For information and tips around re-entering the workforce, check out the Department of Employment website. It includes details about the government’s jobactive service and the New Enterprise Incentive Scheme for those looking to become self-employed.
If you have further questions on how a return to work could impact you, speak to your financial adviser and if you don’t have one contact us on 131 267.
Managing money in retirement
Our short online learning module gives you budgeting tips and ideas around how you can generate an income when you stop work.
Because many people can no longer put as much into super, an investment bond may provide another way to save for retirement.