Retirement has evolved. In Australia and around the world, more and more seniors are choosing not to hang up their hats entirely but instead embrace what’s commonly referred to as “unretirement.” Unretirement is a growing trend where retirees re-enter the workforce, whether for financial reasons or simply to stay engaged and active.
In this blog, we’ll explore the rationale for retired Australians to have their incomes raised, even as they return to the workforce, and provide tips on how to manage their Age Pension allocations effectively.
The Changing Landscape of Retirement
Retirement used to be seen as a one-way journey – you retired, and that was it. However, the traditional concept of retirement has undergone a transformation in recent years, with some factors leading the way:
Increased Life Expectancy
Australians are living longer and healthier lives. Retirement can last for several decades, making it challenging to rely solely on savings and pensions.
Financial Realities
Many retirees find that their savings and pensions may not be sufficient to maintain their desired lifestyle throughout retirement.
Desire for Purpose
A significant number of retirees want to remain active, engaged, and continue contributing to society in meaningful ways.
Skills and Experience
Retirees often have a wealth of knowledge and skills still valuable to employers. Many organisations are recognising the benefits of hiring seniors on account of their detailed experience.
The Rationale for Raising Age Pensions for Working Seniors
Given the changing retirement landscape and the emergence of unretirement, it is essential to consider why raising the Age Pension at 67 (as of 1 July 2023) for working seniors is not only beneficial but also a sound policy decision:
Income Adequacy
Working seniors often face a unique financial challenge. While they may earn an income, it may not be sufficient to cover all their expenses, especially healthcare costs. Raising the Age Pension can provide additional financial support to bridge the gap.
Encouraging Workforce Participation
Increasing the Age Pension for working seniors can serve as an incentive for older Australians to remain in or re-enter the workforce. This can help address labour shortages in various industries.
Reducing Reliance on Welfare
A higher Age Pension can reduce seniors’ reliance on other welfare programmes, such as unemployment benefits or disability support, which can be more costly for the government.
Boosting Retirement Confidence
Knowing that they have access to an increased Age Pension can give working seniors greater confidence in their financial security during retirement, encouraging them to pursue unretirement opportunities.
The Employment White Paper 2023
The above rationale for higher pensions may have borne fruit in an Employment White Paper released by the federal government in late September 2023, following months of consultations spearheaded by National Seniors Australia.
The Paper stated that the current Work Bonus balance limit of $7,800 will be permanently raised to $11,800 effective 1 January 2024. The original implementation of the cap was programmed to lapse on 31 December 2023. Effective late September 2023, the Age Pension fortnightly rate went from $1,064 to $1,096.70 for singles while couples’ allocations stand to go from $1,604 to $1,653.40.
“These changes mean eligible recipients can earn more from work before their pension is affected, broadening their choices and increasing flexibility,” said Social Services Minister Amanda Rishworth.
Age Pension Management
For seniors who choose unretirement or those looking to optimise their Age Pension while working, the following are some valuable tips for managing their pension allocations effectively.
Understand the Work Bonus
The Australian government offers a Work Bonus to Age Pension recipients who continue to work. The Work Bonus allows you to earn a certain amount each fortnight without it affecting your pension payment. Be sure to understand the Work Bonus rules and take advantage of this benefit.
Review Your Asset and Income Limits
Keep track of your assets and income to ensure they remain within the limits set by the government to qualify for the Age Pension. Understanding these limits will help you make informed financial decisions.
Superannuation Contributions
Superannuation is an integral part of Australia’s salary framework and employers are mandated by law to set aside part of their employees’ wages to a super account. This can be a tax-effective way to save for retirement and supplement your Age Pension.
Seek Financial Advice
A financial advisor who specialises in retirement planning can help you create a tailored strategy that maximises your Age Pension while accounting for any additional income from work.
Budget Wisely
Develop a budget that takes into account your Age Pension, work income, and expenses. This will help you manage your finances effectively and ensure you’re not overspending.
Plan for Healthcare Costs
As you age, healthcare expenses can increase. Consider setting aside a portion of your income for future healthcare needs, such as medical bills and prescription medications.
Diversify Your Investments
If you have savings or investments, diversify your portfolio to reduce risk and potentially generate additional income. Consult with a financial advisor for guidance on investment strategies.
Stay Informed
Keep yourself updated on changes in Age Pension rules and regulations. Government policies can evolve, and it’s essential to understand how these changes may impact your financial situation.
Re-entering the Workforce
The COVID-19 pandemic left many ripples that affected much of society, including the need to earn a living. In Australia, the spectre of an idle retirement has forced people to unretire and be productive again. Here are a couple of examples:
Tom Morton
The former journalist and UTS academician retired in late 2020 after years in the circuit, and was looking forward to writing a new book while tending to a home garden with his partner, journalist Eurydice Aroney. However, when he finally completed the book, he was already asking what else to do next, and decided to go back to work.
John Scott
QLD native John Scott spent 50 years in the insurance industry as a self-employed insurer. However, changes that came about as a result of the Banking Royal Commission eventually led him to sell the business and retire in 2021. Although he was doing fine in retirement with his wife, she noticed him becoming quiet over a year after the company sale and suggested he go back to work. He was later accepted for a cleaning and trolley role with the services team at Coles’ Mooloolaba branch. Some may say the job was full-circle as he was a customer at the place for 25 years. Interviewed by Yahoo! Finance’s Tamika Seeto, Mr Scott said the job was fulfilling as it gave him a chance to earn a living and come home to his family after clocking out of shift.
Conclusion
The concept of retirement has evolved to accommodate the desires and needs of seniors in Australia and worldwide. Unretirement, where retirees return to the workforce, has become increasingly common, reflecting longer life expectancies, financial realities, and a desire for purpose.
Raising the Age Pension for working seniors is a rational response to these changes. It provides financial support, encourages workforce participation, reduces reliance on welfare, and boosts retirement confidence. Moreover, understanding how to manage Age Pension allocations effectively is vital for working seniors to maintain financial security and make the most of their retirement years.
As Australia continues to adapt to the changing retirement landscape, policies and practices that support working seniors can contribute to their financial well-being and overall quality of life during retirement and unretirement.
The A.S.A.G. Reverse Mortgage
The A.S.A.G. Reverse Mortgage may possibly aid in a retired senior’s finances as they consider a return to the labour force. While there are options to prepare for retirement via Retirement Planning, the equity from your property may be set up into regular instalments to supplant any income from the job.
Please contact the A.S.A.G. at 1300 002 724 or send an email to info@asagfirst.com.au to discuss your “unretirement” plans. You can also use the equity assessment tool below.
DISCLAIMER: This article is for informational purposes only and does not constitute official advice. A.S.A.G. is not affiliated with any mentioned brands or companies.