Below are a series of articles provided by PSK Financial Services that may be of interest to members.

CAN I GO BACK TO WORK IF I’VE ACCESSED MY SUPER? 

When you access your super at retirement your super fund may ask you to sign a declaration stating that you intend to never be employed again. But there may be compelling reasons why someone would subsequently return to work.

According to the Australian Bureau of Statistics (ABS) the most common reasons retirees return to full or part-time employment are financial necessity and boredom.Regardless of your reason for returning to work, there are certain rules you should be aware of.

What are the superannuation retirement rules?

You generally will only be able to access your super if you’ve reached your preservation age and retired, ceased an employment arrangement after age 60, or turned 65. If you’re thinking about returning to work after retirement there are rules about super you may need to be aware of depending on your circumstances.

We look at some of the common situations below.

I have reached my preservation age but am less than age 60

If you’ve reached your preservation age and wish to access your super, you would usually be required to declare that you’re no longer in paid employment and have permanently retired.

If your personal circumstances have since changed, it is possible for you to return to the workforce, however your intention to retire must have been genuine at the time, which is why your super fund may have asked you to sign a declaration previously stating your intent.

I ceased an employment arrangement after age 60

From age 60, you can cease an employment arrangement and don’t have to make any declaration about your future employment intentions.

If you happen to be working more than one job, ceasing just one will meet the requirement and you can continue working in the other. You can choose to access your super as a lump sum or in periodic payments (which you may receive via an account-based pension).

If you’re in this situation, you can return to work whenever you like as you wouldn’t have needed to declare permanent retirement before accessing your super.

I’m 65 or older

When you turn 65, you don’t have to be retired or satisfy any special conditions to get full access to your super savings. This means you can continue working or return to work if you have previously retired.

What happens to your super if you return to work?

Regardless of which of the groups above you fall into, if you have begun drawing a regular income stream from your super savings, you can continue to access your income stream payments whether you return to full or part-time employment.

If you haven’t actually accessed your super but have met one of the retirement conditions of release (and advised your fund of this) then your super will generally remain accessible if you return to work.

Meanwhile, it’s important to note that any subsequent super contributions made after you return to work will generally be ‘preserved’ until you meet another condition of release (unless you are aged 65 or over).

Can I access my super at 55 and still work?

In the past, Australians could access their super from as young as 55, but the preservation age is gradually increasing to age 60 and only people born before 1 July 1960 reached their preservation age at 55.

Regardless of your preservation age, you must meet certain criteria before you can access your super, as outlined above. However, if you’re aged 60 or over, these criteria simply mean you need to end an arrangement under which you’re gainfully employed.

Rules around future super contributions

Your employer is broadly required to make super contributions to a fund on your behalf at the rate of 9.5% of your earnings, once you earn more than $450 in a calendar month.

This means you can continue to build your retirement savings via compulsory contributions paid by your employer and/or voluntary contributions you make yourself.


Advice that puts you first

Authorised Representative of Charter Financial Planning

AFS Licence No. 234665

At PSK Financial Services our key focus is to guide you through life’s financial challenges and our promise is to help you achieve financial peace of mind.

We offer a wide range of services which focus on every client’s unique goals and needs.

Areas of advice:

  • ·         DVA/Centrelink strategies
  • ·         Superannuation
  • ·         Retirement planning
  • ·         Aged Care
  • ·         Investment
  • ·         Estate planning

For any questions regarding your financial situation please contact

Paul Messerschmidt MFinPlan, GradDipFinPlan

Partner and Senior Financial Adviser

PSK Financial Services

Level 4, 3 Horwood Place, Parramatta NSW 2150

M 0414 811 777 |P (02) 9895 8800

E paulm@psk.com.au


However, if you’re aged 65 or over, and intend on making voluntary contributions, you must first satisfy a work test requirement showing that you have worked for at least 40 hours within a 30-day period before you are eligible to make voluntary contributions in a financial year. Voluntary contributions can’t be made once you turn 75 and the last opportunity is 28 days after the end of the month where you turn age 75.

Effects of withdrawing super on your age pension

If you’re receiving a full or part DVA/Centrelink pension, you’d know that DVA/Centrelink applies an income test and an assets test to determine what you get paid. Your super or pension account will be included as part of your age pension eligibility assessment.

Any employment income will also be taken into account as part of this assessment, so make sure you’re aware of whether your earnings could impact your DVA/Centrelink pension entitlements.

As always and for decisions of this nature you should sit down with a suitably qualified financial adviser to work through your individual circumstances and consider the most appropriate solution for your needs.

To discuss further or to arrange a time to review your current financial position please contact Paul Messerschmidt at PSK on 0414 811 777, 02 9895 8800 or paulm@psk.com.au

Disclaimer: ©AMP Life Limited. First published June 2019. Provided by Paul Messerschmidt of PSK Financial Services.

PSK Financial Services Group Pty Ltd (ABN 24 134 987 205) and Paul Messerschmidt are Authorised Representatives of Charter Financial Planning Ltd (AFSL 234666), Australian Financial services Licensee and Australian Credit Licensee

Information contained in this article is general in nature. It does not take into account your objectives, needs or financial situation. You need to consider your financial situation before making any decisions based on this information.






Dealing with being asset rich and cash poor

Reverse mortgages are promoted as a means to helping retirees with living expenses, however the downside is that equity may be eroded over time.

Given longer life expectancies, the rising cost of living and the property boom, more and more retirees find themselves in a position of been asset rich and cash poor.

One option is to downsize to a less expensive home allowing for an additional $300,000 to be contributed towards Superannuation under certain circumstances but again this can also have its disadvantages. For Example: If they are receiving a part age pension now, converting an exempt asset – the family home – to an assessable asset such as cash or shares could mean a severely reduced pension or even total loss of the pension. To make matters worse, the cost of moving from one home to another is probably close to $100,000, which is a large loss of capital unless the move is absolutely essential. As a result, many retirees take the reasonable view that they are better off to battle along in their present home which, if history is any guide, should continue to give them a reasonable tax-free capital gain.

A reverse mortgage is probably the next thing that comes to mind, but these are becoming difficult to get as banks tighten their lending criteria due to the adverse publicity they have received from the royal commission. In any event, taking out a reverse mortgage involves making some significant decisions. If you take a fixed rate there may be hefty exit fees down the track and if you take a variable rate you could suddenly find yourself in strife if property prices fall when interest rates rise again.

Enter the Pension Loans Scheme: a type of reverse mortgage offered by the federal government. It has been around for years, but was hardly used. However, the terms were improved in the last federal budget and it should now take off in popularity.

The new rules came into effect from July 1, 2019. From that date a couple on the full age pension could receive an additional $684.10 a fortnight ($17,786.60 a year) between them by way of this loan. It would be paid fortnightly, like the pension, and the interest rate would be a very reasonable 5.25%. The loan can be repaid on demand without penalty, but it would be reasonable to expect that repayment will come from the eventual sale of the family home.

The amount a part age pensioner will be able to borrow will be the difference between the amount of the age pension they receive and 150% of the maximum rate of age pension. For example, if a couple received an age pension of $800 a fortnight between them, they would be eligible to draw an additional $1,252 a fortnight ($32,552 a year) under the proposed system.

The Pension Loans Scheme will be available to non-pensioners too. A self-funded retiree couple will be able to draw 150% of the maximum rate of pension, or up to $2,052 a fortnight, combined.

Even though borrowing money under this scheme may solve a short-term cash problem, remember that the essence of a reverse mortgage is that no interest or principal repayments are made on the loan, so it increases faster and faster. The government is aware of this, and as part of the set-up will require a valuation from a licensed valuer on the house which will be used as security for the loan. There will be no cost to the applicant for this.

Furthermore, the amount of the cumulative loan debt that can be accrued will be limited based on a number of factors, including the pensioner’s age and their equity in the secured asset. This maximum cumulative loan amount available will be recalculated every 12 months.

That's a welcome move. Think about a self-funded couple who borrowed the maximum loan of $53,352 a year via fortnightly draw-downs. In just 10 years the debt would be nearly $700,000 and in 15 years a staggering $1.2 million. A reverse mortgage is like a strong drug – good in small doses in the right circumstances.
 

As always and for decisions of this nature you should sit down with your financial adviser to work through your individual circumstances and to consider each of the options to determine the most appropriate route for your needs.

To discuss further or to arrange a time to review your current financial position please contact Paul Messerschmidt at PSK on 0414 811 777, 02 9895 8800 or paulm@psk.com.au


Disclaimer: Article first published by The Sydney Morning Herald on 7 June 2018.  Provided by Paul Messerschmidt of PSK Financial Services.

PSK Financial Services Group Pty Ltd (ABN 24 134 987 205) and Paul Messerschmidt are Authorised Representatives of Charter Financial Planning Ltd (AFSL 234666), Australian Financial services Licensee and Australian Credit Licensee

Information contained in this article is general in nature. It does not take into account your objectives, needs or financial situation. You need to consider your financial situation before making any decisions based on this information.

 


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Association NSW


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