Should I retire? I’m unemployed and have debt

Q: I’m 59 years of age and in March I lost my job. I have since been trying to find work but due to my age I’m finding it excessively hard. After much discussion with my wife we have decided that the best option would be for me to retire. As she is working and earns a decent wage, I am unable to receive government assistance, but with our mortgage and expenses her wage is just not enough. We need some advice on whether retirement is an option for us as it would pay off enough debt so that we could live on her income. Can you advise us if this is possible and tell us how to do it?

I’m sorry to read about your circumstances. SuperGuide is an information site rather than an advisory site so I am unable to advise you on your best option. What I can do however is provide you with some information and pointers for seeking further assistance.

Who can help you?

The following services or professionals may be able to assist you with your decision:

• Financial Information Service. A free government-funded service run under the banner of Centrelink, but you don’t have to be in receipt of a Centrelink benefit to use this service. (click here for more information or telephone on 13 23 00)
• Financial Counselling. You can access free financial counselling to help you manage your day-to-day finances from a financial counsellor. The Australian Securities and Investments Commission (ASIC) has a list of the main services across the country. Click here to access the list. http://www.fido.gov.au/fido/fido.nsf/byheadline/Financial+counselling
• Retirement advice from an accountant or fee-based financial adviser. Although a full-blown financial or retirement plan can add up to thousands of dollars, I’d expect any adviser providing preliminary advice on your circumstances would charge no more than a few hundred dollars. If you’re fortunate, some advisers may provide you with a preliminary view for no charge, but that would be unusual.

If you retire, what are the implications?

If you do retire before the age of 60, you’re likely to have to pay some tax on your super benefits. If you retire on or after the age of 60, then you can expect to receive all of your super benefits tax-free (unless you’re a member of one of the older public sector funds). For more information on the tax implications of retiring check out the following articles:

• I’m 59 and I have $180,000 in super. Will my super be taxed?
• Retiring before the age of 60: the tax deal
• Retirement: Taking benefits before the age of 60
• Tax-free super for over-60s

Note: In some circumstances, an individual who retires may, at a later stage, reconsider his or her circumstances and decide to return to work. I explain this possibility in the article Super for beginners, Part 9: If I retire and take my super, can I return to work?

If you retire, your super fund will require you to complete a form that provides evidence of your intention to retire, and proof of your identity.

Note: If you’re suffering mortgage stress, you may be eligible to access some of your super benefits on compassionate grounds which may enable you to reduce debt without retiring, although the access rules are strict. I explain the rules in the article Super for beginners, part 10: Can I use my super to reduce my mortgage?