After a lifetime of hard work, Australians in their 50s and 60s have a bewildering range of options to secure their retirement future as they approach, and pass, the official pension eligibility age.
Fortunately, we've done the heavy lifting for you and outlined some of these key decision points which could make all the difference for a successful retirement.
What is Australia's Age Pension eligibility age?
To get the Age Pension, you need to be of qualifying age. This will rise from 65 in six monthly increments, depending on what date you were born between 1 July 1953 and 1 January 1957 and onwards, until it reaches 67.
You must also have been an Australian resident for at least ten years in total, without having lived overseas for five of those years.
As of December 2020, the maximum amount of money you can receive, per fortnight, if you are a single is $860.60. Couples combined can get $1297.40. You may also qualify for a pension supplement of $69.60 for a single and $105 for a couple. There’s an energy supplement too, and a telephone and pharmaceutical allowance that you should discuss when applying for the pension.
Can I give my superannuation a big boost in the lead-up to the pension eligibility age?
Yes. If you’d like to get a big tax advantage and boost your superannuation savings, and you are under the age of 65, you can take advantage of the “bring forward” rule from the Australian Taxation Office.
It allows anyone under 65 to put up to three years’ worth of non-concessional (after tax) contributions in their super in one year. That means you can put $300,000 in (the annual cap is usually $100,000 a year).
The best part: earnings on your investment are taxed at a maximum rate of 15 per cent and, when you do access your superannuation savings, any non-concessional contributions will be returned to you completely tax-free.
This offer is not available to those who have a balance that exceeds $1.6 million.
Importantly, the government currently has legislation sitting in the Australian Senate seeking to allow people aged 65 and 66 to use the "bring forward" arrangement, in line with the increased pension age. We'll update this piece when this legislation has passed and there is a clear timeline for its implementation.
Can I still work and receive the Age Pension?
Yes. Age Pension rules support part-time and casual work through the combined application of the pension income test and the Work Bonus. Single pensioners with no other income can earn up to $478 a fortnight and still receive the full pension, and couples can earn $316 a fortnight combined plus another $300 each before their pension is reduced.
Can I work and still draw money from my super?
Yes. As your approach retirement age, you may be able to take advantage of a Transition to Retirement (TTR) plan that lets you draw down some of your super before you retire while continuing to work. You must be at your preservation age (between 55 and 60 depending on when you were born) and you will need to transfer some, but not all, of your superannuation to an account-based pension.
The advantages of a TTR account are that you can still receive super contributions from your employer and, if you are 60 or older, your TTR pension payments are tax free.
Get advice about whether a TTR pension would impact any government benefits you or your partner receive, or whether it affects the life insurance you have with your super fund.
Up until what age can I make superannuation contributions?
As the pension age increases over time, the government is also changing the age at which people can make regular contributions to their super fund.
In the 2019/20 Budget, the maximum age limit for concessional contributions and non-concessional contributions was raised from 65 to 67. Those over 67 and up to 75 must work at least 40 hours over a 30 consecutive day period before they can make voluntary contributions to superannuation.
Can I use the proceeds of my family home sale to boost my superannuation?
Yes. Selling the family home and moving to a smaller house, or a cheaper area, can free up cash for your retirement, but you’ll need to plan a long way ahead.
From 1 July 2018, you have been able to make a special downsizer contribution into your superannuation of up to $300,000 from the proceeds of selling your home if you have owned it ten or more years.
It is non-concessional and will not count towards your contributions cap. It can also still be made if you have a super balance greater than $1.6 million, although will count towards your pension assets and income test. Other conditions apply.
The above represents just a few of the potential decision points as you approach, and then pass, the pension age.
For instance, see our other stories in this series:
- How to use home equity to fund your retirement
- How working seniors can use government schemes to boost their retirement nest egg
Always get independent financial and legal advice before making decisions that affect your financial future.
Helen Hawkes is a business and lifestyle journalist who has written for clients including CPA Australia, Westpac, Colonial First State, The Australian Financial Review, QSuper and the Australian Institute of Superannuation Trustees. She has bought and sold five houses and is currently planning a comfortable retirement.