I’m nearly 60 and might lose my job. Can I really afford to retire?
There is a possibility that I may lose my job by the end of the year and I think I will have difficulty finding new employment, potentially forcing me into early retirement. I’ll be turning 60 soon, making $77,000 (plus super), single with no dependents. My plan was always to work until age 67 and then live on retirement plus pension. I have a house worth ~$800k with $356k super (high growth), $205k mortgage and $51k offset and I have no other debt or investments. Living expenses are approximately $3,000 per month.
I recently contributed $100,000 to the retirement fund using carryover concessional caps and am expecting a tax refund of about $15,000. How secure is my position without downsizing, especially when it comes to managing my mortgage?
Thanks for your question. We all operate under the assumption that we will retire at a time of our choosing, but as you show here, things don’t always work out that way.
If a job loss occurs, you should definitely sit down with a financial planner and make a detailed plan. But here are a few items you need to consider.
First, as you probably know, if your job ends and you are over 60, you may be eligible for retirement. Based on the numbers you provide, you can withdraw a lump sum from your retirement fund and clear your mortgage.
This provides great peace of mind and eliminates mortgage costs, which reduces your cash flow needs. Of course, you’ll miss out on the gains your super fund would make, but you may find that a reasonable trade can be made in the circumstances.
You can apply for Jobseekers’ allowance if you become unemployed. Because you are under the age pension age (67), any money in retirement will be disregarded for means testing purposes.
While Jobseekers’ assistance may not be generous, it may be enough to get by once your mortgage clears, and if you have a large unexpected expense you can address this with a lump sum withdrawal from retirement.
Alternatively, you can convert your pension into a pension and start earning a regular income. This will now apply to testing which means Centrelink, so this will likely exclude you from all the benefits there, but you may be able to get a higher income level in the short term.
You will live on your pension until you reach the age of 67, and then you will be entitled to an old-age pension. Given your expense ratio and the numbers you provided, this looks like it will add up.
Our 43-year-old daughter suffers from high levels of anxiety, has never entered the workforce and lives on a small state pension supplemented by our support.
Our income comes from pensions, and while we do not want to deprive ourselves, we are wondering if it might be a good strategy to open a retirement account for our daughter now and contribute to those amounts when we have extra money.
This can be a great way to provide early inheritance gifts that will contribute to her financial security in the long run. When he eventually receives his inheritance, he will likely want to use the super system for tax efficiency purposes.
However, contribution limits may restrict what is possible. By gradually increasing these savings over the coming years, he can maximize his wealth in the super environment. Pension money is not taken into account by Centrelink until age 67, so this asset should have no impact on his pension.
Paul Benson is a Certified Financial Planner. Guidance Financial Services. He is hosting Financial Autonomy podcast. Questions: paul@financialautonomy.com.au
- The advice given in this article is general in nature and is not intended to influence readers’ decisions about investments or financial products. They should always seek their own professional advice, taking into account their personal circumstances, before making any financial decisions.
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Paul Benson is a Certified Financial Planner and host of the Financial Autonomy podcast.
