Early retirement used to be the dream of many. But these days, the trend seems to be leaning toward seniors who have chosen to work well after retirement age. In fact, many of today’s seniors have planned to continue working into their 70s! If you are soon to be reaching retirement age, you may be wondering about the personal and tax benefits of working into retirement, as well as needing additional superannuation advice.
Longer Life Expectancy
The truth of the matter is this: the seniors of today and tomorrow are and will live longer. This means that any retirement savings must live longer as well. So what it comes down to is whether or not you have the financial means to live to a high age without working. Many seniors do not, which is why they have chosen to work longer.
A Safety Net
Those seniors who have not done adequate planning for their retirement can find a solution in working past into retirement age. Working can provide additional assets that can avoid having to dip into savings for a little while longer.
In addition to the financial benefit of retiring later or not at all, there are also the health benefits that staying active and socializing daily can have on the body. Mental alertness is another reason so many seniors have chosen to continue working past their retirement years. As well, as a senior, you may enjoy having the choice of working where you prefer to, instead of where you have to.
The Best of Both Worlds
The Australian government allows seniors to continue to work as they draw from their super. This ‘transition to retirement’ policy allows for the supplementation of salary with super benefits, which results in a more comfortable lifestyle. But this policy also allows seniors to pay less tax, as the policy allows for generous concessions for super contributions and retirement income streams.
How Your Super Is Taxed
This depends on a few variables, including the amount of your super, your age and whether or not your super’s source is taxed or untaxed. Super benefits can be paid as a stream of regular income, or via lump sum. Those who are sixty years of age or older whose only income is their super from a taxable source will not need to provide a tax return. However, other income sources will require the completion of a tax return.
If your super has a tax-free component, it will usually apply to those amounts you’ve contributed to your super without claiming as tax deductions. As well, any other amounts contributed to your super that are considered to be tax-free will also count.
Because many rules can apply to individual situations, it is strongly urged that any senior looking for answers about retirement planning and how continuing to work affects it seek the advice of a financial professional.
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