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Semi-retirement and super: Maximise the benefits

We explain what transitioning to retirement means for your superannuation and lifestyle.

If you’re planning on easing into retirement via part-time work, you need to consider how it will affect your superannuation and lifestyle. Semi-retirement can have benefits for both your nest egg and your lifestyle, but there are many factors to consider.

Working part-time (generally defined as up to 30 hours a week) in semi-retirement can be a great way to transition gradually into the huge lifestyle change you’re about to make. There are mental, emotional and social benefits to keeping a foot in the working world, and there can also be financial advantages.

Semi-retirement and super

The financial benefits of semi-retirement

Working part-time gives you an income, which means you may not have to draw on your superannuation. You could also continue making contributions to your super, depending on how your salary and living costs add up.

Depending on your age, you may not yet be eligible for the Age Pension, so working part-time can also allow you to scale back while still receiving an income.

You may also use a transition to retirement strategy by commencing a pension while working part-time. This strategy allows you the option of supplementing your pay by drawing a pension from your super, if you have reached preservation age.

You need to ensure that your particular superannuation fund or self-managed superannuation fund (SMSF) allows a pension option – most do have this function. While you cannot withdraw money as a lump sum, if you are under 65 years old and working you are able to transfer your super to a super pension and withdraw between 4 per cent and 10 per cent of the pension account balance each financial year.

After you turn 60 years old you don’t pay tax on your super benefit payments and your employer can continue to contribute to your super balance.

The lifestyle benefits of semi-retirement

Transitioning to retirement via part-time work can offer significant lifestyle benefits. Transitioning to retirement in this way can enable you to live the lifestyle you want in retirement. Working part-time can give you time and flexibility, so you can enjoy things like recreational activities, hobbies and spending time with family.

But there are some technicalities to consider and you need to be confident that the move fits your own income and lifestyle requirements.

Before deciding to semi-retire ensure you seek expert advice, check the potential tax benefits and any ramifications for insurances held with your super fund, and any implications for your own or your partner’s pension or other entitlements (for example, health) through government social security.

If you are considering semi-retirement and wish to set up an SMSF to take advantage of the many benefits you can read more about how a pension in an SMSF works or download an information pack. If you’re ready to establish an SMSF, you can apply now with ESUPERFUND.

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