What to consider if you’re forced to retire early

Total up any debts like your mortgage, credit card debts and outstanding loans. Consider if there are ways to get rid of some of your debts such as selling your car or boat and buying a cheaper one, refinancing a loan, or paying down some of your credit card debts.

Go through financial statements from your credit cards and any other receipts to identify where your money has been going. Establish your regular bills, food and healthcare costs and then identify expenses that are more discretionary. Look for places where you can cut back unnecessary expenditure.

What are my financial options if I’ve been forced to retire?

1. Check if you qualify for government assistance

Depending on the reason you’re retiring early, you may be eligible for a range of government benefits and assistance. The Services Australia website (which includes Centrelink and Medicare) provides information about benefits you can claim.

JobSeeker Payment is financial help if you’re between age 22 and Age Pension age and are looking for work. If you’re eligible, it’s also payable when you’re sick or injured and cannot do your usual work for a short time period.

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Eligibility includes meeting income and assets tests and residency rules. From 20 March 2024, the maximum fortnightly payment for a single person aged 55 or older is $816.90. If you’re partnered, the maximum fortnightly payment is $698.30.

A Mobility Allowance payment can help with travel costs when you’re looking for work if you have a disability, illness or injury that means you can’t use public transport.

Disability Support Pension (DSP) is income support if you have a physical, intellectual or psychiatric condition that will last more than two years and stop you from working at least 15 hours a week in the next two years. To receive this payment you must meet both medical and non-medical rules. The maximum total payment rate per fortnight (including supplements) is $1,116.30 for singles and $1,682.80 for a couple (20 March 2024 to 19 September 2024).

Carer Payment is a fortnightly income support payment if you give constant care to someone who has a disability, a severe medical condition, or is an adult who is frail aged. It is also paid if you’re caring for someone with a terminal illness. To be eligible you must be providing constant care for at least six months. The payment rates for the Carer Payment are the same as for the DSP.

Even if you don’t qualify for the Carer Payment, you may be eligible for the Carer Allowance. The allowance is paid if you are caregiving to a loved one or someone else with a medical condition, disability, or who is frail and elderly. The Carer Allowance is a fortnightly supplement to your normal income. In 2024, the Carer Allowance is $153.50 each fortnight.

Rent Assistance is an extra regular payment if you pay rent and receive certain government benefits. The Energy Supplement is an extra payment to help with energy costs. Rent Assistance and the Energy Supplement are automatically paid to renters receiving the Age Pension, Carer Payment, Disability Support Pension and JobSeeker payments.

2. Apply for the Age Pension

The Age Pension is the main income support payment for people who have reached Age Pension age, which is 67 years or older. To qualify you need to meet the residence rules and both the income test and assets test.

The Age Pension provides access to a range of payments, concessions and assistance. Currently the maximum Age Pension rate is $1,116.30 per fortnight for a single and $1,682.80 for a couple  

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If you’re old enough to receive the Age Pension but don’t meet all the eligibility rules, you may still be eligible for a Commonwealth Seniors Health Card. This card can give you access to cheaper medicines and may provide other concessions.

3. Change careers or apply for part-time work

If you weren’t forced into retirement due to ill health, you may need to consider looking for alternative employment – even part time – to support your retirement lifestyle. Earning even a small amount means you won’t need to dig into your savings and super.

Part-time work may also give you the time and flexibility to find a job you want. Turning your hobby into a money maker or side hustle is also a way to generate additional income. Online platforms have made this easier than ever.

For those in their early 50s, retraining for an alternative career may be an option.

4. Apply for insurance benefits

If you are ill or injured and can no longer work, you may be able to apply for a Total and Permanent Disability (TPD) payout from your super fund’s insurance cover. Generally, salary continuance and income protection insurance will not payout if you are made redundant.

6. Use your home for financial assistance

Consider whether you could downsize or make a sea or tree change to an area where housing is a bit cheaper. The risk with this strategy is selling your home doesn’t necessarily free up capital to help pay for your retirement. There are lots of transaction costs to pay when buying and selling property, with many regional and rural homes now just as expensive as metropolitan areas. You also need to consider the potential impact on any Age Pension or government benefit you’re entitled to receive.

Another alternative could be using your home to generate income through online accommodation platforms like Airbnb, taking in a boarder, or offering student housing. Renting out a room or part of your home can generate income, but don’t forget you need to pay tax on it.

7. Think about a reverse mortgage

Your home can also provide income through a reverse mortgage, which is a financial product offered by some banks or financial lenders. These products work like regular mortgages but in reverse, so instead of making payments, you receive either a lump sum or regular payments from the lender. Repayments are not required until you sell or pass away.

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The government also helps retirees looking to generate income from their home through the Home Equity Access Scheme (HEAS), which is a form of reverse mortgage. The HEAS can be a useful income boost and provides non-taxable fortnightly payments (or lump sums) from Services Australia or the Department of Veterans’ Affairs (DVA) and is secured by a loan against your home.

8. Ask family for financial assistance

Although it’s not an attractive option for many people, seeking financial assistance from family members or friends may help tide you over. Even a short-term loan until you qualify for the Age Pension or can access your super could be helpful if you need money quickly.

9. Run down your savings pool

Many people find when they retire unexpectedly, they don’t qualify for government assistance or benefits for a variety of reasons. In this situation you may need to start using your accessible savings (such as bank accounts) or selling assets (such as shares, investment income or boats) to pay for your regular expenses.

Although this is not an ideal solution, you may find in time you qualify for government assistance, so ensure you keep a close eye on your financial position and reapply if it changes significantly.

When you can access your super

There are strict government rules covering when you can access your super. In certain situations you may qualify for an early release payment to help you temporarily; otherwise, to draw down from your super you generally need to have reached your preservation age (generally age 60) and be retired. (Your preservation age is not the same as the age you can apply to receive the Age Pension. Your preservation age only relates to accessing the benefits in your super account.)

To obtain your super, you also need to meet a condition of release:

• If you’re age 60 and have left your job, you can access your super
• If you’re age 65 or over, you can access your super whether you’re working or not.

Accessing your super before preservation age

You are only able to access part of your super prior to reaching your preservation age in special circumstances, such as:

• If you become permanently or temporarily incapacitated
• If you’re suffering severe financial hardship or from a terminal medical condition
• On compassionate grounds.

If you’re eligible to withdraw your super, you can choose to take your savings as a regular payment (like the pay you received from your former employer), or as a partial or full lump sum and leave the remainder to continue growing in your account.

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