Have you ever wondered if retiring and starting a super pension will stop you from returning to work if you have a change of heart? The short answer is no, it won’t. Retirement isn’t a ‘locked-in’ contract. You can retire and go back into paid work if you want.
You may retire and then suddenly be enticed back to work by someone who values your skills. Some people get bored and decide retirement doesn’t suit them, while others worry their retirement savings are being depleted too quickly. Some early retirees may discover their spouse doesn’t want them hanging around the house all day – and there’s only so much golf a person can play!
As with everything to do with super though, there are rules. To access your super in the first place, you need to satisfy a condition of release. The rules vary depending on your age.
If you’re younger than 60
If you’re under 60, you must have reached your preservation age and retired. Preservation age is determined by your year of birth. It will increase gradually to 60 for everyone born on/after 1/7/64.
Your super fund will ask you to sign a declaration stating that you’re no longer in paid employment and you intend to retire permanently. The key word here is ‘intend’. Provided your intention is genuine at the time you sign the declaration, there’s nothing stopping you returning to work.
If you’re over 60 but not yet 65
Once you turn 60, you can retire without having to declare your future work intentions and start withdrawing your super as a pension or a lump sum. You simply notify your fund that you’re retiring.
You don’t even need to fully retire. If you have more than one job, you only need to stop working at one of them to satisfy a condition of release. You can then return to work whenever you like and continue to access your super.
If you’re 65 or older
From age 65 you can access your super whether you’re retired or not, without having to satisfy any special conditions of release. This means you can continue working full or part time or retire and return to work whenever you want.
Can I add to my super, upon my return to work, after retirement?
When you return to work, you can rebuild your super via compulsory Super Guarantee contributions from your employer, or your own voluntary contributions. Any new contributions will be ‘preserved’ until you meet a new condition of release unless you are over 65.
If you are aged between 67-75, you will need to meet a “work test” if you intend to claim a taxation deduction in relation to personal contributions made to super. You need to show that you’ve worked for at least 40 hours in a 30-day period during the financial year you make the contribution.
The good news is that, since 1 July 2022, the work test has been repealed for people aged 67 to 75 who wish to make non-concessional (after-tax) contributions or salary-sacrifice contributions.
You cannot make voluntary contributions once you turn 75. The one exception is downsizer contributions made with the proceeds from the sale of your home. There is currently no upper age limit on downsizer contributions.
Pros and cons
Before you go back to work, it’s important to understand the implications for your super and future retirement income.
The main benefit of retiring before starting a new career or taking on some part-time work is that the money in your super pension is tax-free after age 60.
The downside of retiring early and accessing your super is that you run the risk of outliving your savings.
If you want to have your cake and eat it too, then satisfying a condition of release to access your super and returning to full, or part-time work may well be worth considering.
