Retirement tips for Australians without a full superannuation safety net
Most people who commenced paid work before the 1992 launch of compulsory employer contributions won’t have enjoyed money going into their retirement fund for the full duration of their working lives.
Others have spent most or all of their adult lives as caregivers – stay-home parents, carers for elderly parents or relatives living with disability. Unquestionably valuable work, yet sadly unpaid – meaning no superannuation.
Then there other factors impacting retirement savings – the gender pay gap, periods of unpaid leave, unemployment, working abroad, being a low income earner and more.
So don’t think you are alone if you don’t have enough in superannuation for a comfortable retirement.
Consider the following options to fall back on instead of, or as well as, your super:
Age pension
This is the most obvious alternative. What fewer realise, though, is that you may still be eligible for a part-pension, even if your assets exceed the eligibility threshold for the full amount.
Claiming a part-pension will stretch what super you do have further. Plus, the related concession card entitles you to a range of discounts, reducing your living costs.
Don’t overestimate the value of your assets under the pension means test – potentially denying yourself a legitimate source of income.
Semi-retirement
Consider transitioning to part-time work instead of retiring outright, allowing you to reduce your workload while still generating both income and employer contributions into your super.
This could include self-employment – many retirees begin building a business out of their hobby or do paid consulting work within their industry (often a much higher hourly rate than as a permanent employee).
Your home
If you own your home, chances are you are sitting on a pile of equity.
Yes, you would need to sell and move in order to unlock those funds. But it’s tax-free money. And it can be as much of a lifestyle opportunity as a financial one: downsize to a home with less maintenance needs; relocate nearer to grandkids; enjoy a seachange or treechange.
Downsizer provisions also allow you to contribute a chunk of the proceeds into your superannuation over-and-above voluntary contribution caps.
Investments
Certain investments can deliver a lucrative passive income stream, which you can use in lieu of – or alongside – income from super. Think investment property rents, share dividends, even renting out your car/caravan/boat when you’re not using it.
Or you could sell investments you own and use the proceeds to top up your super, which is typically more tax effective than holding as cash.
Family business/trust
If you have a family business or family trust, you may be able to draw down a regular income from it if structured correctly.
Doing so over time from operating profits/investment returns, rather than as a lump sum, means a trust can continue as normal without being forced to sell assets or be wound up, while a business can continue trading under family ownership without the remaining directors having to find the cash to buy out your share (though this may be another option to explore with them).
Living costs
Your living costs are quite different in full-time retirement compared to full-time work.
Goodbye to many commuting, clothing, personal grooming, professional development, registration/certification, lunches and coffees, and work-from-home expenses.
Hello to greater energy bills (more time at home and no more remote working tax deductions), travel and lifestyle spending.
Don’t overlook the power of updating your household spending and investments plan to reflect this new reality, cancel work-related outgoings and cut unnecessary spending.
Timing
Perhaps the most far-reaching, yet most commonly overlooked, aspect around retirement is timing. For instance:
- the later in the financial year you retire, the more employment income you have accrued – potentially pushing you into a higher tax bracket and ballooning your tax bill.
- the proceeds from investments differ depending on when in the market cycle you sell them.
- retiring early may reduce employment bonuses, leave payouts, share option entitlements etc.
- both spouses/partners retiring simultaneously may reduce overall employment earnings, while conversely unlocking greater opportunities to do things together (like travel, shared hobbies, visiting family).
A qualified financial adviser can help you work through your various options and alternatives, allowing you the peace of mind to enjoy your golden years comfortably – whether that is with or without superannuation.
Helen Baker is a licensed Australian financial adviser and author of On Your Own Two Feet: The Essential Guide to Financial Independence for all Women. Helen is among the 1% of financial planners who hold a master’s degree in the field. Proceeds from book sales are donated to charities supporting disadvantaged women and children. Find out more at www.onyourowntwofeet.com.au
Disclaimer: The information in this article is of a general nature only and does not constitute personal financial or product advice. Any opinions or views expressed are those of the authors and do not represent those of people, institutions or organisations the owner may be associated with in a professional or personal capacity unless explicitly stated. Helen Baker is an authorised representative of BPW Partners Pty Ltd AFSL 548754.
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