How to earn an income during retirement

Many Australian seniors want to earn more money in retirement. But where might that income come from?

Retirement should be a time to enjoy the fruits of our working years. However, for many seniors, the age pension and/or their superannuation savings may not be enough to fund a quality lifestyle. That can leave seniors looking for other ways to make money in retirement.

As a guide to the possible income gap, the latest (June quarter 2022) Retirement Standard from super industry body ASFA, shows that singles aged 65-84 need income of around $47,383 annually to fund a ‘comfortable lifestyle’ in retirement. Couples require a combined income of $66,725 annually.

According to the Australian Bureau of Statistics, the government pension is still the main source of income for most retirees. When you consider that the full age pension is worth a maximum of $1,026.50 per fortnight for singles ($26,689 annually) or $1,547.60 fortnightly for a couple combined ($40,237.60 annually) from September 2022, it’s easy to see why some seniors may not meet ASFA’s benchmark incomes for a comfortable lifestyle.

7 ways to make money in retirement

While there are strategies that can make your age pension stretch further, a key issue for seniors can be how to earn an income in retirement. After all, there’s nothing like extra cash coming through the door to give your lifestyle an uptick.

Here are seven ideas for making extra money in retirement – and any potential drawbacks to be aware of.

1. Make the most of your super and other investments

Once you hang up your work boots, it is especially important to use your investments wisely to maximise retirement income.

An account-based pension (or private income stream) is one option for accessing your super savings to generate retirement income, while keeping the bulk of your balance invested. Most super funds offer account-based pensions, often with the flexibility to draw down your account balance at regular intervals (e.g. monthly, quarterly, half-yearly or annually). This can be a tax-effective approach, according to Moneysmart.

Money that you have outside of super can also be invested in ways to boost your retirement income. The options can range from term deposits and fixed income managed funds through to shares and exchange traded funds.

Of course, it’s always wise to obtain professional financial advice before making decisions about retirement income planning and investment choices. The investment choice that’s right for you will depend on your own personal financial situation, objectives and goals, risk profile and needs.

2. Consider part-time work

Extending the time you spend in the workforce means less time drawing on your super savings, which can help to stretch your nest egg for longer – or give you higher super-based income when you retire full-time.

Staying on at the coalface is a popular step. Over 600,000 over-65s are in the workforce, according to the Australian Government, with a surprisingly even split between full-time (48.7%) and part-time (51.3%) senior workers.

But there can be a catch to heading back to the workforce to earn extra income in retirement, especially if you rely on the age pension as a key source of income.

If you receive an age pension it may be worth talking to Services Australia about how any employment income could affect your entitlements. You could be eligible for the Work Bonus, which reduces the amount of employment income that is applied to your age pension under the income test.

The Albanese government has promised to increase the amount you can earn before any age pension payment is reduced, from $7,800 to $11,800, as a temporary measure this financial year.

3. Use your home to generate income in retirement

Opening your home to paying guests can be a way to earn extra income in retirement as well as meet new people.

Short term rental platform Airbnb says Australia is home to one of the highest proportions of ‘hosts’ aged over 60 in the world. One in five of the platform’s Australian hosts are aged 60-plus, and the average income across Airbnb’s senior hosts nationally is about $8,000 annually.

If you’d prefer a more predictable source of income in retirement, you may like to think about renting out a spare bedroom to a longer term tenant.

Just remember to consider any tax implications of using your home to generate an income, either currently or if you choose to sell your home down the line.

4. Babysitting, after school care or family day care

Even with government subsidies available, child care can be an expensive option for parents. It means there’s often demand for more affordable childcare options.

One way to boost income in retirement is to babysit for a small fee or run your own family day care or after school care service from your own home. It’s an option that lets you choose the number of days you work, and the number and age of children you care for.

You will need to meet various criteria to become registered as a carer, but if you love being around children, Family Day Care Australia says the average hourly fee for family day care is $10.70.

5. Join the gig economy

The ‘gig economy’ simply refers to independent contractors, who find work through various platforms such as Airtasker or Uber. And it’s big business, the gig economy is estimated to be worth a total of over $6.3 billion annually. A slice of that action could really ramp up your income in retirement, but you don’t necessarily have to list with a platform. There is nothing to stop you organising your own freelance work.

Common options include dog walking – which could see you pocket over $26 an hour, according to averages from Indeed, and stay fit in the process – and house cleaning, which according to HiPages can yield approximately $30-$60 per hour.

If you’re a jack-of-all-trades, platforms like Airtasker let you pitch for a variety of one-off jobs – anything from putting together flat-pack furniture to helping someone move house. Airtasker says it is possible to earn up to $10,750 per month as one of its top 50 ‘taskers’.

6. Selling crafts or skills from home

Websites like eBay, Etsy and Gumtree have made it easy for anyone familiar with the internet to sign up as a vendor and sell their homemade crafts – or even just the old stuff you have lying around home that you never use.

What if you don’t make crafts or have stuff to sell, but you do have skills that are not being used right now? You could start cooking classes, become a children’s party planner, or offer tuition to people wanting to learn a musical instrument. It’s all about monetising the skills you have.

7. A reverse mortgage as a source of retirement income

If you are looking at ways to generate an income stream in retirement, a reverse mortgage is an option some people consider. This lets you access funds by borrowing based on part of your home equity. No repayments are necessary until you sell up or pass away, and the loan payments can often be taken as a regular payment rather than as a single lump sum.

Reverse mortgages tend to come with higher interest rates than traditional home loans. A lower rate option could be the federal government’s Home Equity Access Scheme available through Services Australia. It allows eligible older Australians to access a non-taxable loan where your home equity acts as security. The current interest rate is 3.95% and interest compounds each fortnight. If you receive the age pension, your combined loan and pension payment each fortnight under the Scheme can’t be more than 1.5 times your maximum pension rate.

If you’re a self-funded retiree, the Home Equity Access Scheme can pay up to 150% of the maximum age pension per fortnight.

There are risks involved and it may have a long-term impact on your and your family’s finances. So it can be a good idea to get financial advice so you can make an informed decision.

As we noted earlier, earning extra income in retirement can be a plus for your bank balance and your lifestyle. However, the extra cash also has the potential to impact age pension payments. It can be worth seeking financial advice about the best way to increase income during retirement without compromising any other entitlements. Services Australia has a free financial information service to help you make an informed decision.