Retired!

Well, sort of. Most of the tasks that comprised my usual workload had been automated during the past year, so my current position was made redundant. There were a range of alternative positions that I could have 'applied' for, but none were really of great interest to me, or a good fit for my skill set and qualifications. It also made little sense financially to continue working rather than receive a redundancy payment (which gets rather good tax treatment). So I decided to take early retirement. As I am over 60 and retired, I was now able to purchase a lifetime pension product from QSuper and use the remainder of my Transfer Balance Cap to move most of my SMSF accumulation account into pension phase.

I used about $440K of my overall super to purchase a lifetime pension from QSuper, that will provide about $29,682 pa pension. The amount isn't automatically increased in line with CPI rises, but does get 'adjusted' annually based on the performance of the underlying Balanced fund vs a 5% 'benchmark' and also how the 'pool' of pension recipients fares in terms of mortality (vs. actuarial expectations). Looking at how the Balanced fund has performed over the past 17 years, the average ROI was 9,85%, with two years of negative performance. After taking off the 5% benchmark hurdle, the average performance was 4.85%, with four years of the past 17 having a negative 'adjusted' return. The mortality adjustment is a bit harder to estimate, as there was only five years of historic data available, and the mortality adjustment ranged from -0.50% to 0.64%, with the average being -0.21%. However the mortality adjustments were likely affected by the impact of Covid on life expectancy during this period. Overall though, it looks like there is a good chance that the average adjustment during my retirement may will be able to keep pace with CPI. There is a minimum total payment guarantee, so if I die before the total pension payments exceed the initial purchase price, the difference would be paid out to my estate. On the other hand, if I live a long time most of my longevity and sequence-of-returns risk is mitigated.

As my annual budget is only about $48K, this means that the lifetime pension should cover about 60% of my core retirement expenses. My remaining TBC 'space' meant that I was able to also move about $1.55M of my SMSF accumulation account and TRIS into 'pension phase'. At the current 4% minimum pension withdrawal rate (based on my age), this means I will have to receive about $62K pension from our SMSF. As I only 'need' about $18Kpa in addition to the lifetime pension to cover basic living expenses, I will use the 'surplus' pension income to continue my regular investments (PM gold and my Investment Bond contributions) and to build up my investment property mortgage offset account balance. Overall, my tax free self-funded pension payments total around $90K pa, which is equivalent to what my after-tax salary income was.

I spent the first two weeks of retirement organizing my superannuation pension transactions, planting some blackberry bushes in the garden, and doing some home chores (tidying up and throwing out accumulated junk, and rearranging some furniture). I was already getting a little bit bored (although I could always spend more time working on my PhD...), so I decided to submit a few job applications for financial planner positions. I have no idea if I'll get any job offers though. As my superannuation pension payments are not taxable income, any employment income would be quite tax effective, so if a get a job offer I might reconsider retirement. Fortunately reconsidering and resuming employment after retiring will not impact superannuation that is already in pension phase.

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