Plan to Work in Retirement? Know the Financial Pros & Cons

Most of us plan to retire someday and (we hope) transition to a secure, financially independent lifestyle in retirement. And for most of us, getting to a place of financial independence involves acquiring enough wealth while working to generate the money needed later on in life.

When you retire, if you’ve accumulated enough money, you make a financial shift from relying on earned income to relying on income from retirement savings, including:

  • Money from investments inside and/or outside superannuation funds, and
  • Social security (age pension) entitlements

However, some people choose to continue working on a casual or part-time basis after retirement. Doing so means they still receive earned income as well as money from a superannuation account or pension.

There are many reasons why people continue to work in retirement, including:

  • Financial needs
  • To stay active or busy
  • For personal enjoyment
  • For a sense of belonging
  • For self-esteem/self-identity
  • To share their skills and experience
  • They don’t feel ready to retire

Other people choose not to work during retirement. Again, there are many reasons, but it’s often because they have saved enough during their working years and don’t need the additional income. It can also be that they’re ready to stop working and enjoy more free time, or because they have other responsibilities or health concerns.

In addition to earned income, research shows that there are physical and mental health benefits that come from working as we age. However, from a financial perspective, there are important financial pros and cons to understand when it comes to employment and earned income during retirement.

For instance, depending on your circumstances, here are a few things you’ll need to keep in mind if you plan to continue working in retirement:

  1. Your age pension entitlements could be reduced
  • You might not be able to make additional contributions to a super fund
  • Your ability to access super contributions may change
  • If you earn over the tax-free threshold (currently $18,200 in 2023) you will be subject to income taxes
  • Working part-time or casually can mean you may not be eligible for the same benefits as full-time employees, such as paid sick leave, holidays or health insurance.  

In short, retirement doesn’t always mean the end of ‘work,’ but there are financial pros and cons to consider before you make a choice. If you’d like to learn more about your options, as well as discuss important factors that may affect your personal finances during retirement, contact our team today.

About the Author
Chris has spent his entire career at Accru Harris Orchard. After joining in 1981, he left to study, and to gain experience working overseas – and then returned to the firm he feels so much a part of.
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