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With each generation, Australians are living longer which is driving a desire, or need, to work for longer to ensure a more comfortable and financially secure retirement.
The trend towards semi-retirement has a lot of benefits that extend beyond simply enjoying an ongoing income. While you’re still working, you won’t need to draw as much from your super and you can actually keep topping it up.
There are health benefits as well. The Centre of Excellence in Population Ageing Research (CEPAR) published a research brief in November 2018 titled ‘Retirement Income in Australia’ as an in-depth study into trends in retirement income for Australians. It looks at the current state of, and projected future of, retirement income and the system that shapes it.
The CEPAR report also examined research which showed that working part time into retirement may have a positive impact on the physical and mental health of Australians.
Workforce participation ages
The mature age labour force participation of Australians, for those aged 55 to 64, is close to the OECD average but the rates trail nations like Sweden and New Zealand by over 10 percentage points. However, the mature age labour force participation rates in Australia are increasing faster than the OECD average.
The retirement ages for Australians are also in line with the OECD average, at 63.6 for women and 65.1 for men. But again, these are lower than countries such as New Zealand, which CEPAR points out has a pension system that creates few disincentives to employment.
Older Australians who stay in work are more likely to work part time than the OECD average. The Australian Bureau of Statistics (ABS) has conducted surveys on retirement intentions and the findings suggest this is likely to continue. The ABS found that 37% of those planning to retire intend to work part-time before retiring entirely.
Retirement and happiness
The Australian Institute of Family Studies (AIFS) released survey findings in 2015 which showed that those who were unemployed saw large gains in life satisfaction after retiring, while those working part-time had higher overall life satisfaction both prior to and after retirement.
Senior CEPAR investigators also found age discrimination to be persistent in Australia, reducing opportunities and creating barriers to individuals working longer.
They also highlighted that voluntary retirement is important for late life happiness. Those who leave paid work on their own terms do not experience the distress and drop in satisfaction of those that are forced to leave, even in the presence of increased welfare dependency and declining health.
This finding suggests efforts to encourage older age labour force participation from the demand side (the employers) will be positive, both for the economy and the workers, according to CEPAR. Of course, delaying the pension age may be problematic when the capacity to work is low.
The impact of retirement on health and wellbeing
A 2016 University of Newcastle study involving more than 20,000 older Australians discovered an association between retirement and physical dysfunction among men and women.
Retirement was associated with a 5 to 14% increase in difficulties with mobility and daily activities.
The authors also found a link between retirement and psychological dysfunction in men, but not women. This gender difference is potentially due to work playing a more important role in the lives of men than in that of women.
Men and women react differently to retirement
Other studies have reinforced this gender difference. In a Sydney University survey of over 200,000 Australians, the authors found that retirement was linked to psychological distress in both genders between 45 and 64, but only in men between 65 and 74. This link was especially strong for those who retired involuntarily.
None of these links are shown to be causative as such. People with poor health are more likely to retire rather than necessarily become sick after retiring. Some argue that forcing people to work longer may in fact be bad for morbidity and even mortality.
Why work part-time in retirement and what can it do for income?
If you are aged 55 or over you may be able to take advantage of a transition to retirement strategy (TTR or TRIS). Transition to retirement pensions allow you to supplement your pay with a draw down from your super, if you need to, after you have reached preservation age. You pay no tax on your super income from age 60 and your employer will continue to top up your super.
To learn more about the rules around transition to retirement pensions and view some examples of how they can be used, read our Guide to transition to retirement pensions.
If you are still working when you reach Age Pension age your income may reduce the amount of Age Pension you are entitled to.
- Singles can earn $172 per fortnight before their Age Pension reduces. It will drop by 50 cents for every $1 you earn over $172.
- Couples who are both eligible for the Age Pension can earn $304 per fortnight (combined) without affecting their Age Pension. It will also drop by 50 cents for every dollar of income over this limit.
However, you may also be eligible for the Work Bonus whereby the first $250 of your employment is not counted towards the Age Pension income test. The Work Bonus is also scheduled to be increased to $300 from 1 July 2019.