Too many Australians are waking up to the grim truth of an existence defined by backbreaking toil with no chance of a peaceful retirement. Karen Eley is a veteran money coach and CEO of Women Talking Finance. She brings to light the difficulties of reaching retirement age, especially since the government lifted the age pension eligibility from 65 in 2023 to 67 years old. Eley emphasizes the importance of understanding various funding approaches. This understanding is especially important for those who are in challenging situations and considering retiring before age 62.
Eley points out that accessing superannuation early before you hit the preservation age can have significant lasting impacts. Your preservation age is between 55 and 60 years, depending on the year you were born. For anyone born on or after 1 July 1964, the preservation age is 60. Eley is quick to warn that early access can open up adverse tax consequences. This could have significant effects on an individual’s long-term economic well-being.
Downsizing as a Viable Option
One example of a strategy Eley recommends is moving to a smaller house. This approach can help individuals looking to retire early tap into the equity of their property while minimizing ongoing costs associated with larger homes.
“If your family home is worth $700,000 and you can find a property to live in for $500,000, perhaps relocating to a smaller house or more affordable suburb can generate extra funds,” – Karen Eley
From this equity you can channel funds directly into your superannuation. Or instead, you can cash them in to pay for living costs while waiting to qualify for superannuation and/or the age pension. Eley explains how this approach enables homeowners to enjoy a decent standard of living and build wealth at the same time.
Eley points out that older Australians are under increasing pressure to stay employed even when health problems prevent them from continuing in their role. She states, “My body is stuffed; I have chronic back issues, shoulder, and neck issues,” illustrating the physical toll that working long hours can take on individuals as they approach retirement age.
The Age Pension and Financial Support
One of the requirements to be eligible for the Australia age pension is that you’ve lived in Australia for at least ten years. Further, you must physically live in the country at the moment. Further, the asset limits are zero, yes, zip, nada, for non-homeowners but almost $15,000 for homeowners. A single homeowner is allowed assets up to $704,500. A non-homeowner may own assets worth as much as $962,500. Couples have a combined asset limit of $1,059,000 for homeowners and $1,317,000 for non-homeowners.
The age pension is a great equaliser providing different levels of support. The single, maximum basic rate before tax is currently $1,051.30 per fortnight. For a couple, that’s $481.50 per fortnight (homeowner) and $739.50 (non-homeowner). Eley emphasizes the growing pressures faced by many in the workforce: “It’s disappointing the government hasn’t considered the unintended consequences of increasing the age pension for hard-working Australians.”
If you are 55 or older and have been on JobSeeker benefits for at least nine months, you are eligible for additional support. This extra assistance comes to just $55 per fortnight. While this support is critical in lifting some immediate fiscal pressure, it lacks the long-term vision of what sustainability looks like.
Understanding Superannuation Access
Eley goes on to clarify, people can access their superannuation without limitations once they turn 65 years of age. This is the case even if they have not retired yet. Taking superannuation before reaching the preservation age can impact negatively on long-term financial security.
“However, it’s important to understand the costs and the long-term impacts on drawing down on the equity in your home through these loans,” – Karen Eley
She cautions that early access to superannuation might seem like an appealing prospect today. It may lead to a crippling financial burden during retirement. So many young Australians are under significant stress to stay in the workforce, some have even reported suicidal thoughts about their lives ahead.
“I will not make it to retirement and get to enjoy life as I should — if I don’t have my health then what is the use,” – Anonymous
Eley’s perspective highlights the need to focus on making long-term financial strategies the right choice and their sustainable impacts. People need to make these decisions with great care to ensure they receive a comfortable retirement while not jeopardizing their health or financial status.
