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Have you ever wondered if retiring and starting a super pension will stop you from returning to work if you have a change of heart?
The short answer is no, it won’t.
Retirement isn’t a ‘locked-in’ contract. You can retire and boomerang back into paid work if you’re so inclined.
You may retire and then suddenly be enticed back to work by someone who values your skills. Some people get bored and decide retirement doesn’t suit them, while others worry their retirement savings are being depleted too quickly. Some early retirees may discover their spouse doesn’t want them hanging around the house all day – and there’s only so much golf a person can play!
As with everything to do with super though, there are rules…
To access your super in the first place, you need to satisfy a condition of release. The rules vary depending on your age.
If you’re younger than 60
If you’re under 60, you must have reached your preservation age and retired. Preservation age is determined by your year of birth. It’s currently 58 for people born on or after 1 January 1963 but will increase gradually to 60 for those born on or after 1 July 1964.
Your super fund will probably ask you to sign a declaration stating that you’re no longer in paid employment and you intend to retire permanently.
The rules are the same for SMSFs. Graeme Colley, executive manager, SMSF technical and private wealth at SuperConcepts, says SMSF members need to write a letter to their fund’s trustee. In most cases, this amounts to a ‘note to self’ saying you’re retired and intend never to return to work.
The key word here is ‘intend’. Provided your intention is genuine at the time you sign the declaration, there’s nothing stopping you returning to work if you change your mind for whatever reason.
And because you’ve already satisfied a condition of release, you can continue to receive your super pension after you return to work.
If you’re over 60 but not yet 65
Once you turn 60 you can retire without having to declare your future work intentions and start withdrawing your super as a pension or a lump sum. You simply notify your fund that you’re retiring or, if you have an SMSF, write a ‘note to self’ to that effect.
You don’t even need to fully retire. If you have more than one job, you only need to stop working at one of them to satisfy a condition of release.
You can then return to work whenever you like and continue to access your super.
If you’re 65 or older
From age 65 you can access your super whether you’re retired or not, without having to satisfy any special conditions of release.
This means you can continue working full or part time, or retire and return to work whenever you want.
Can I add to my super?
When you return to work, you can rebuild your super via compulsory Super Guarantee contributions from your employer or your own voluntary contributions.
Even though you can continue to access your super after you return to work, any new contributions will be ‘preserved’ until you meet a new condition of release unless you are over 65.
However, once you turn 67 you can only make voluntary contributions if you satisfy the work test. Currently, you need to show that you’ve worked for at least 40 hours in a 30-day period during the financial year you make the contribution.
Voluntary contributions can’t be made once you turn 75. The one exception is downsizer contributions made with the proceeds from the sale of your home. There is currently no upper age limit on downsizer contributions.
Pros and cons
Before you get back in the saddle, it’s important to understand the implications for your super and future retirement income.
Colley says the main benefit of retiring before starting a new career or taking on some part-time work is that the money in your super pension is tax free after age 60.
The downside of retiring early and accessing your super is that you run the risk of outliving your savings, depending on the size of your nest egg to begin with.
If you want to have your cake and eat it too, then satisfying a condition of release to access your super then returning to full- or part-time work may well be worth considering.
The information contained in this article is general in nature. Accessing your super is an important financial decision and it’s best to seek independent professional advice based on your individual financial needs and circumstances.
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