For some, the idea of retirement is a distant dream, while for others it's a looming reality that requires careful planning. But what exactly is the retirement age? Is there a one-size-fits-all answer and if not, how do you know when to retire? In this article, we'll explore the concept of retirement age and help you figure out when it's the right time to say goodbye to the daily work grind.
What is the retirement age?
In Australia, you generally have the flexibility to decide when you want to retire.
Now you’re probably wondering what’s stopping you from retiring tomorrow. One of the important things to think about is how you'll fund your retirement. That means asking yourself the big question: when can you afford to retire? This is where rules around accessing superannuation and retirement benefits come into play. Importantly, age thresholds, such as the preservation age and the Age Pension age, could affect your decision on when to retire.
What is the preservation age?
Preservation age is simply the minimum age at which you can access your super. The preservation age in Australia is 60 years old, and you will be able to access to your super so long as you have either:
- permanently retired from the workforce
- ceased an employment arrangement on or after the age of 60
- are over age 60 and have started a Transition to Retirement strategy
- turned 65, regardless of whether you’re still working or not.
Learn more about the conditions of release
What is the Age Pension age?
This is the age at which you may become eligible to start receiving financial support from the government in the form of the Age Pension. The Age Pension is designed to help older Australians who may need assistance with basic living expenses, like food and housing.
For Age Pension age as at May 2024, check the table below.
1 July 1952 – 31 December 1953
|
65 years and 6 months
|
|
1 January 1954 – 30 June 1955
|
66 years
|
|
1 July 1955 – 31 December 1956
|
66 years and 6 months
|
|
Born on or after 1 January 1957
|
67
|
|
1 July 1952 – 31 December 1953
|
65 years and 6 months
|
| |
1 January 1954 – 30 June 1955
|
66 years
|
| |
1 July 1955 – 31 December 1956
|
66 years and 6 months
|
| |
Born on or after 1 January 1957
|
67
|
| |
Check the Services Australia website for the latest information on the Age Pension age.
Apart from the age threshold, you must also meet residency requirements, and something called a "means test". This test looks at your income and assets to see if you qualify for financial help.
How much do you need to retire?
Working out how much you'll need to save for retirement can be daunting. The Association of Superannuation Funds of Australia (ASFA) has estimated how much couples and singles aged 67 need for a comfortable or modest retirement, shown in the below table.
Superannuation balances required for retirement at age 67
| Comfortable retirement |
$690,000
|
$595,000 |
| Modest retirement |
$100,000
|
$100,000
|
| Comfortable retirement |
$690,000
|
$595,000 |
| Modest retirement |
$100,000
|
$100,000
|
Source: ASFA Retirement Standard, March quarter 2024.
Note: Both budgets assume that the retirees own their own home outright and are relatively healthy. All figures in today’s dollars using 2.75% AWE as a deflator and an assumed investment earning rate of 6 per cent. The lump sums required for a comfortable retirement assume that the retiree/s will draw down all their capital, and receive a part Age Pension. The fact that the same savings are required for both couples and singles for a modest requirement reflects the impact of receiving the Age Pension
For more information on how the table has been calculated, visit the ASFA website.
Keep in mind that these are only general estimates. While these may be a useful starting point to help you plan your retirement, you should consider speaking with a licensed financial adviser about your personal circumstances.
When should I retire?
Even though the preservation age and Age Pension age may be relevant considerations, there's no one age that's perfect for retirement. The important thing is to plan ahead for the possibility of a longer retirement than you might think. As Australians are living longer, it's important to consider that you may need more savings to avoid running out of money later in life. In some cases, this might mean exploring the idea of working longer than you originally expected.
For many people, it's not too early to start planning about their retirement and generally the sooner they start planning, the more time they’ll have, which can help better preparing themselves for the future. Ultimately, it's your decision when you start slowing down or stop working altogether, based on your circumstances and financial ability to do so.
Need help deciding when to retire?
If you’re a Rest member who wants to speak with a professional about your super or retirement plans, you can book a call with a Rest Adviser. Out of pocket advice fees apply for retirement planning. We’ll always talk to you about any fees first.
What to consider when planning your retirement?
Everyone’s goals and lifestyles are different, which means the amount you need for your retirement is also going to be different. It depends on many factors, with one important factor being how much money you'll need to support your lifestyle once you stop working. This will depend on a range of factors, including:
- your retirement goals
- your existing finances
- your expected expenses.
Ask yourself:
- what kind of lifestyle are you aiming for after you retire? i.e. comfortable, modest or something else.
- based on your preferred lifestyle, how much money do you think you’ll need each year?
- how many income source(s) will you have, and what type(s)? e.g. super, the Age Pension, and any investments you might have.
- will you have any debts, ongoing costs or other expected expenses? i.e. mortgage repayments or rent and medical expenses
- how close are you to retirement? If you’re planning to retire in 5 years, your plan could look very different from someone who’s retiring in 10 years.
These are only some considerations, so take the time to carefully plan and consider your retirement goals and finances, and if required speak to a licensed financial adviser. This may help you set yourself up for a retirement that meets your unique needs and aspirations.
Transition to retirement
If you’re ready to slow down and reduce the hours you work, accessing some of your super through a transition to retirement (TTR) account can be one way to supplement your work income as you approach retirement age. Depending on your circumstances, it may be possible to maintain a similar level of take-home pay.
With a transition to retirement account, you can access your super savings while you’re still working. It’s an option for those who may not be ready to fully retire but want to gradually reduce their working hours while still receiving an income.
To be eligible for a transition to retirement strategy, you must have reached your preservation age. Generally, this strategy may suit those who:
- are still in the workforce
- have existing super benefits
- want to continue to receive super contributions
- are transitioning to retirement.
It’s important to keep in mind that accessing your super through a TTR income reduces your retirement savings and may impact your government benefits and life insurance. It’s a good idea to speak with a financial adviser to make sure a transition to retirement strategy is right for you and your retirement plans.
