For many, retirement represents the culmination of decades of hard work and dedication. It’s also often thought of as a time to savour the fruits of one’s labour, explore newfound passions, and bask in the glow of a well-earned rest.
But in this era of extended lifespans and evolving financial landscapes, retirement is no longer as simple as quitting your job and walking off into the sunset… Many retirees find themselves needing (or wanting) to generate income after leaving full-time work.
If you’ve suddenly found yourself in this position, don’t panic, as according to the experts, there are many ways you can earn money post-career.
What is the best source of income in retirement?
Lachlan Anderson, Partner & Financial Adviser at Discover, says that there’s no ‘best’ source of income in retirement without first defining what ‘best’ means to you.
“You need to discuss and define the term ‘best’ here, do you mean the most reliable, the longest-lasting, the most tax effective, or the best return?”
However, Lachlan concedes that there are some sources of income that are better than others.
“Focusing on income from investments, certainly, drawing down from a superannuation fund would be the closest option to being considered the best. Drawing regular income from super, when converted into an account-based pension, provides tax-free income – when you’re over 60 – and can be designed in a way that lasts as long as you need it to, and you can choose to have this paid to you on a regular basis, such as fortnightly or monthly, with the flexibility of adjusting your payments along the way.
“Another form of a superannuation income stream is an Annuity, which is less flexible but still ticks the boxes for reliable and tax-free income.”
There are also some sources of income that can work extremely well for some but can be incredibly limiting and unreliable for others.
“Some retirees, who have accumulated properties will be living off rental income, which can be a reliable source of income, one that can also be adjusted for inflation, however rental income is taxable, and many investors will understand that rental income is not always reliable, with tenants moving out and property expenses coming up from time to time.
“Dividends, paid from publicly listed shares, like the CBA for example, can also be a good source of income, as often this will be received tax-free for a retiree because the companies themselves have paid tax at 30% already. However, this may not be as reliable, given that the company paying the dividends can decide after each reporting period how much they are going to pay, the CBA dividend has ranged between 3.8 percent and 5.9 percent over the last 4 years.”
And finally, if you’re wanting to generate income from something other than an investment, a part-time or casual job – otherwise known as a side hustle among the cool kids – is worth considering.
“The best non-investment, or, earned income has to be from a source that you’re passionate about and brings you enjoyment,” Lachlan says.
What is a good side hustle for a retiree?
Speaking of side hustles, if you’re wanting to generate income as a retiree in a more imaginative way, there’s plenty of ways to do so.
Lachlan advises that you should engage in a side hustle you enjoy.
“Perhaps it’s a continuation of the skills you have accumulated over your career, or it’s in an area that you are personally passionate about.”
Some side hustle ideas, if you’re looking for inspiration, include:
- “Garden care and/or maintenance
- Selling plants and/or setting up a backyard nursery
- Consulting (are you a subject matter expert from a previous role?)
- Freelance writing or photography (websites like UpWork, Fiverr and Pixpa can be a place for this)
- Pet sitting and/or dog walking (websites like MadPaws and Pawshake can help with this)
- Driving and/or deliveries (think Uber and MenuLog)
- Second-hand sales and/or flipping items”
Of course, if you’re looking for a more stable side hustle, Alex Jamieson, Australia’s leading financial advisor, says getting a job with flexible hours is the way to go.
“If a retiree needs some additional income, casual work can often be a flexible income source. Part-time and casual jobs are ideal as they allow retirees to supplement their income in a manner which suits their lifestyle.”
What are some common challenges retirees face when it comes to generating income post-retirement?
Sadly, retirement is not all smooth sailing (even though, in theory, it should be). There are multiple challenges, especially pertaining to income, that arise.
According to Alex, “The biggest challenge for retirees is entering retirement underfunded”.
“This can place tremendous financial strain on one’s income position throughout the retirement period and places the retirement asset base at risk of depleting well before one’s life expectancy.”
To avoid this pitfall, the adage, ‘The best defence is a good offence’ is one to live by…
“Working for a longer period of time prior to commencing retirement might save tremendous hardship throughout retirement.”
Another common roadblock retirees face is a lack of confidence, Lachlan believes.
“From my observations the most common challenge is knowing how and having the confidence to start, and often, the solution to this challenge is simply to just do exactly that: start!
“If you want to start a side hustle, doing pet-sitting for instance, then just give it a go one time. Maybe you have a friend who’s going on holiday, you can ask them if they would like to leave their pet with you and negotiate a reasonable fee. Then if you enjoy that experience you can let your neighbours know you are available for the same thing, or you can perhaps post about it on your local area Facebook page. Who knows how big it could grow, but you’ll certainly never find out if you don’t make a start.”
Lachlan also says that a lack of knowledge can hinder retirees.
“I have heard that people are scared off by not knowing the rules around earning an income and receiving the age pension, or having to pay tax; again my first suggestion is to just start, and then if you end up making some money, you can figure out the flow on impact on these subjects.
“I can confirm that retirees are absolutely entitled to earn some income from work and still receive the age pension, and depending on the rest of your financial position, you may not have to pay any tax either – importantly, every situation is different and to get an official answer to these questions you should speak to a financial adviser.
“If you have questions on setting up business structures and more complex issues, that can be discussed with an accountant or financial adviser too, however, if the idea is just to generate a little bit of extra cash, not create a global conglomerate, then the structuring and managing cash flow of a side hustle should not be complex.”