Some common questions that we hear as financial advisors are “what age am I allowed to retire?” or “what is the retirement age in Australia?”
Currently, there is no legislation that controls when you’re able to retire. This means there is no fixed retirement age in Australia.
According to the Australian Bureau of Statistics, the average Australian retires at age 55.4, including individuals who have left their last job due to illness, injury, job loss, and other reasons. However, when looking at the average age for retirees who have left the workforce in the last five years, the figure rises to an average of 63 years old.
It is completely your choice to decide when you are ready to give up working. However, there are numerous other variables that are important to consider when discussing what age you should retire. It’s important to prepare yourself financially, so below we have outlined some things you may want to consider.
You May Need to Fund a Longer Retirement
One of your main concerns will most likely be the longevity of your finances. This is why the effort that you put into managing your money now will make a large difference in how much you have when you retire.
You might not realise that Australians are now living longer, so you may need a larger sum of money to last you throughout your retired life.
If you are 65 currently, there is a 50% chance that you will be alive at 95. This means you may need to account for 30 years of retired living.
Your Health May Prohibit You From Working Longer
More often than not, injury, illness, or redundancy may affect your ability to participate in the workforce. This is a key factor that could prevent your potential to accumulate superannuation assets and other savings to fund your retirement.
Research shows that by 2035, one in four men and one in five women in their 60s will have poor or at best, fair health.
So, it’s clear that it’s crucial to begin saving for retirement or contributing to your superannuation sooner rather than later.
Retirement May Not Be a One-Off Event
Of retirees who were underprepared for their retirement, 14% said they would have to reenter the workforce in order to fund their financial shortfall.
With good retirement planning, the stress of having to go back to work after being settled in retirement could be eliminated.
What If I Don’t Have The Funds to Support Myself Throughout Retirement?
Although most of us may dream of retiring early, this may not be your reality.
There are generally two age rules that impact when most Australian’s have the ability to retire, as they allow you to access funds to support your transition to retirement.
These are as follows:
- Preservation Age – The earliest age where it’s possible in normal circumstances to access your superannuation.
Generally, it’s only possible to withdraw your super after you’ve reached your preservation age, which is between 55 and 60, depending on when you were born.
We have outlined the preservation ages below for your convenience.
- Age Pension Age – The age when you have the ability to access the Age Pension Government benefits, provided you meet the eligibility criteria.
Currently, the Age Pension age is 66 years old, however, this could be higher depending on your date of birth.
We have outlined the Age Pension ages below for your convenience.
What If I Want to Retire Early?
As elaborated on above, there are a lot of variables that may affect your ability to retire early, which is why it’s crucial to begin implementing tactics as early as possible.
Some of the ways that you may be able to ensure a solid income throughout retirement are through strategies such as:
- Concessional and Non-Concessional Contributions to Superannuation
- Government Benefits (ie. Age Pension)
- Saving and reducing debt while still in the workforce
After reading this article, you should have a deeper understanding and clarity about the retirement age in Australia and how you can prepare your finances for when the time comes.
The years prior to your retirement are an opportunity to add more to your savings and contribute to your superannuation.
Your super is likely to be a large part of your post-work income, however, it doesn’t need to be your only income. Savings, Government assistance, and investments can also provide alternative financial resources to ensure your comfortability in retirement.
Yield Financial Planning is Here to Help
Good retirement planning can help you strengthen your financial position. If you don’t know where to begin planning, contact the expert advisors at Yield, to start the conversation about your retirement.