Question 1: I read the story in The New Daily on super and going back to work. I’m past my preservation age (born in 1958) and have around $600,000 in super. I was considering taking a redundancy package, possibly a payout of between $140,000 and $160,000, which I believe is considered ‘tax free’ by the ATO. From this payout I would clear current debt (leased motor vehicle and personal loan) worth $80,000 and bank the remainder or consider shares or EFTs, not that I understand this well. I would then access my super balance to buy my government rental house, which hopefully will cost between $240,000 and $300,000. I would then draw down on the remainder of my super as income fortnightly or monthly. My wife (born 1955) does not work, nor has any super or other income. She may be eligible for some form of pension this year or next.
Does any of the above sound feasible or do I need to suck it up and remain in my government job for probably another four years before pulling the pin when I get closer to the federal government’s retirement age of 67? If I left the workforce now on the above scenario, can I, at a later date, return to the workforce without penalty? Thanks for any response or advice.
There are plenty of things to consider.
Firstly, with a potential redundancy, you receive a portion of the payment tax free. So, $11,341 plus $5672 per year of completed service (as at 2021-22). As an example, if you had completed a full 10 years and then received a redundancy, the tax-free amount is:
$11,341 + ($5672 x 10) = $68,061.
The remainder would be taxed at concessional rates, as would any outstanding annual or long service leave.
If you accept a redundancy the government may have a set time period where they would not consider hiring you again, say 12 to 24 months. However, you could always apply for a job in the private sector.
Your age pension age is 67, and your wife’s would be either 66 or 66½ depending on whether she was born in the first or second half of 1955.
By keeping your money in super, repaying debt and using your redundancy to purchase a principal place of residence, this will not count towards your wife’s age pension entitlements as she is a few years older than you.
Your super would only count once you reached 67. Therefore, there is an opportunity to maximise her entitlements for a few years. Even after you reach 67, from the numbers you have provided you would both be eligible for a part-age pension. This could supplement your superannuation pension payments.
What you have outlined does sound feasible with one big caveat, how much income do you want to live on in retirement?
My advice would be to carefully answer this question first. You could complete a detailed budget or take your current net income and take off any expenses you won’t need in retirement as a starting point.
Once you know how much income you need, you can the work out how much you need to save and how long you need to work for. Moneysmart has a good retirement calculator that could help you.
As you are nearing retirement and have some big decisions to make, I suggest speaking to a licensed financial adviser who can assist you in planning for your retirement, including the best structure to hold your assets going forward.
Question 2: I have cash in bank receiving little interest. Also GESB super held as cash. I am 70 years old and don’t want take risks. Is the above cash options the best I can be doing without locking in long term. Also, is my money safe in the bank?
With interest rates at record lows unfortunately you will only receive little interest on you cash investment and bank account.
One truism in investing is the higher the return, the higher the risk.
However, you could look at investing some of your investments into a more diversified investment option to achieve a slightly higher return and more diversification but still stay low risk, albeit not as risk free as the cash option.
Super funds have to label their investment options via a standard risk measure band. You can access this via their website or investment guide. As an example, GESB’s is shown below:
I would suggest getting in contact with your super fund, as many of them offer investment choice advice at no additional cost to you as the member.
In relation to your bank account, the federal government guarantees the first $250,000 of an individual’s money, per authorised deposit-taking institution (this includes bank, building society or credit union) in the event of the institution failing.
So yes, money in a bank account is very safe.
Craig Sankey is a licensed financial adviser and head of Technical Services & Advice Enablement at Industry Fund Services.
Disclaimer: The responses provided are general in nature, and while they are prompted by the questions asked, they have been prepared without taking into consideration all your objectives, financial situation or needs.
Before relying on any of the information, please ensure that you consider the appropriateness of the information for your objectives, financial situation or needs. To the extent that it is permitted by law, no responsibility for errors or omissions is accepted by IFS and its representatives.
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