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Pros and cons of working in retirement

As we move through our working lives, most of us hope and plan to transition from a state of financial dependence early on to a secure, financially independent lifestyle in retirement. And for most people, getting to a place of financial independence requires accumulating enough wealth during our working years to generate the money to cover our needs later on.

Therefore, at the time of retirement, a shift in economic resources occurs – namely, a shift from earned income to income derived from retirement savings, including:

  • Investments inside and/or outside superannuation, and
  • Potential social security (age pension) entitlements

However, employment income doesn’t necessarily end for everyone during retirement. Some people continue to work on a casual or part-time basis whilst also receiving income from, for instance, a superannuation account or a pension.

There are many reasons why people continue to work in retirement:

  • Financial necessity
  • To stay active and busy
  • For self-esteem/self-identity
  • To share or use their skills and experience
  • For personal enjoyment and satisfaction
  • For a sense of obligation and belonging
  • They feel too young or not ready to retire

Conversely, it’s quite understandable to discontinue work too:

  • The income may not be needed
  • Caring for someone
  • Offered a redundancy package
  • To have more personal/free time
  • Health deterioration or illness
  • Dissatisfaction or boredom with work
  • Physical or mental demands or stress

Research suggests that there are not only financial, but also physical and mental health benefits associated with working as we age, whether the work is paid or not. However, from a personal finance perspective, there are important considerations to make regarding employment and earned income in retirement.

Research suggests that there are not only financial, but also physical and mental health benefits associated with working as we age, whether the work is paid or not. However, from a personal finance perspective, there are important considerations to make regarding employment and earned income in retirement.

For example, depending on your circumstances, here are just a few things to consider if you continue working after you’ve retired:

  1. Your age pension entitlements may be reduced
  2. You may not be able to make additional contributions to your superannuation fund
  3. Your ability to access superannuation contributions may change

Retirement doesn’t always mean the end of employment. As noted above, there are many reasons why people continue employment, but there are also financial factors to be aware of.

If you’d like to learn more about your options, as well as important considerations that may arise regarding your personal finances during retirement, we work with financial advisors in Accru Midsec, or you can contact our team today.

Disclaimer: The information contained in this article is based on information believed to be accurate and reliable at the time of publication. To the extent permissible by law, neither we nor any of our related entities, employees, or directors gives any representation or warranty as to the reliability, accuracy or completeness of the information; or accepts any responsibility for any person acting, or refraining from acting, on the basis of information contained in this blog. This information is of a general nature only. It is not intended as personal advice and does not take into account the particular investment objectives, financial situation and needs of a particular investor. Before making an investment decision you should speak with your financial planner to assess whether the advice is appropriate to your particular investment objectives, financial situation and needs.