Retirement

Daniel Brown

Financial ExpertUpdated on June 7, 2022

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If you retired today, would you have a nest egg to last the rest of your life? 

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Australia’s average life expectancy is 83.  Increased living costs have made it critical for Australians to start preparing for retirement sooner rather than later.

This article includes crucial information about Australian retirements, such as eligibility, inheritance, age pension accounts, and healthcare-related factors. 

You can also read our helpful step-by-step retirement planning guide to make the entire process easier. 

Matthew Bennett | Unplash

Retirement Eligibility

Retirement

The average age of retirement in Australia is 55.   

If you’re an Australian citizen, then you’re eligible to access your superannuation between the ages of 55 and 60. 

 Age Pension

You can qualify for your age pension at 66.5 years old. However, in 2023, this figure will rise to 67.

First, make sure you meet various requirements. These include reaching the age pension eligibility age, passing an income test and assets test, and other requirements.   

Australia doesn’t have a fixed retirement age. Therefore, you can determine when to start your retirement life.  

Superannuation

You can access your superannuation when you:

  • Reach preservation age and retire  
  • Stop an employment arrangement at 60+ years old
  • Transition to retirement through an investment strategy after reaching preservation age
  • Turn 65 years old regardless of whether you stay in the workforce

Preservation Age

This age of retirement is when you can begin accessing your superannuation. The age is usually between 55 and 60.

Average Australian Retirement Age

Australia’s average retirement age is about 55 years, but this figure has been trending towards a later retirement transition. 

The average retirement age has spiked to nearly 63 years old over the past five years.

Additionally, over one-quarter of Australians between 45 and 59 years old return to the Australian workforce.  

Inheriting Assets

It’s critical to ensure you have a valid and updated will since this is a crucial aspect when you start planning your retirement.

 You’ll need two key documents if you plan on authorising a person or organisation to make decisions on your behalf. 

These documents are the power of attorney and the enduring power of guardianship, which end when you pass away.

Enduring Power of Attorney

This document authorises a certain person or organisation to make financial and legal decisions on your behalf.

You can determine whether it takes effect either:

  • At a particular time of your choosing. The document’s validity may continue while you can make your own decisions.
  • After you cannot make your own financial and legal decisions.

Enduring Guardianship

This document authorises a particular person to decide on health, medical, and lifestyle issues. The legal document takes effect if you’re not able to make your own decisions.

Will

This other key planning document is for retirement accounts. It outlines what you want to do with your estate and other assets after your passing. 

A will usually includes various details:

  • Executor, co-executors, and substitutes for managing the estate
  • Testamentary guardian to care for your children under 18
  • Beneficiaries and what they ought to receive, including money, assets, or gifts to either people or organisations
  • People to care for your pets
  • Funeral wishes
  • Trust fund

Things to Think about When Retiring

Funding Longer Retirement

Australia’s elderly population is growing rapidly, and more Australian retirees are requiring financial budgeting skills and helpful methods for allocating their savings.

Experts project that by 2054 to 2055, the number of Australian retirees will reach about two million.

Therefore, it’s wise to consider later retirement, longer workforce participation, or returning to the workforce after initial retirement. These steps can help avoid financial mistakes that may occur during retirement. 

Health Effects from Working Longer

In terms of being in the workforce, health is a critical factor as you become older.

  Health can affect the growth of your various bank account savings, such as your super, to fund a comfortable retirement.

More than one-fifth of Australians between the ages of 60 to 64 rate their health as fair or poor.

Start contributing to a super fund and saving for retirement as soon as possible.

 Supplement Age Pension

The Association of Superannuation Funds of Australia (ASFA) shows that a relatively healthy and home-owning 65-year old single person who retires today needs a yearly income of about $43,600 to live a comfortable retirement.

Meanwhile, the maximum age pension rate for single Australians is  $26,268 per year. 

In other words, you’d almost have to double your yearly regular income through sources of income streams, such as super funds, to live a comfortable retirement.

The age you can receive an age pension and the age when you can access your superannuation account is usually different. 

Factors include your year of birth, when you reach the preservation age, and retirement.  

Saving Money for Recreational Activities

Today’s Australians are living more active lives. The ASFA Retirement Standard reveals that singles and couples with a comfortable lifestyle spend about one-fifth of their weekly budget on recreation and leisure.

  It’s a wise idea to consider your recreational activities and hobbies after you leave the workforce. This step will allow you to do the activities you enjoy.

Retirement Guide 

When doing financial planning, it’s essential to conduct retirement planning. 

It’s quite easy to put off preparing for retirement; however, as each year passes, it becomes more of a reality.

  This retirement guide is the first critical step when planning.  

 Step 1: Understand Your Retirement Needs

Planning for post-work life will be easier when you know your current financial situation and financial goals. It’s wise to develop a retirement plan as part of your general financial plan.

Here are some critical questions to ask:

  • How much will it cost you to maintain a preferred lifestyle?
  • How are you able to control costs?
  • What is your personal risk tolerance?
  • What is your preference for cash liquidity?
  • What is your retirement timeline?
  • What kind of retirement lifestyle do you prefer?

Step 2: Devise a Superannuation Strategy

It’s important to understand the basic mechanisms of superannuation or “super” and how it’s related to retirement.

Don’t worry if you’re unfamiliar with super. You can implement various financial strategies to use your superannuation to create a dream post-work future.

An effective strategy includes voluntarily contributing to your super.

This practice provides several income tax advantages, especially for high-income earners. It’s among the most effective methods for making sure you can reach the retirement lifestyle you want.

  This option provides various benefits. You can lower current tax obligations while investing in your dream future by jumpstarting your retirement income.

Step 3: Understand Your Retirement Picture

Your super fund is among the key parts of your retirement plan. However, other factors can affect your post-work life. They include:

Government Age Pension

As of 2017, the Australian government offers pension to citizens 65.5 years or older. 

Unfortunately, a pension isn’t enough for most people to live comfortably off. 

Factors such as income and other investments through the Australian Securities and Investment Commission (ASIC) can also reduce the pension.

Retirement Safety Net

It’s important to guarantee you have enough retirement savings for a comfortable lifestyle. It could make a huge difference in unexpected situations. 

Such circumstances include upsizing your home or increasing the size of your family.   

A financial safety net allows you to deal with the surprises in life. This measure can help you reach your dream future. 

Investing to Diversify Retirement Income 

After you retire from work, you should have other income sources besides your superannuation. You can choose from investment options like property and stock shares based on your situation and goals.  

For example, you can get a stable income through owning an investment property. You can also lower investment risks through other physical assets.  

Meanwhile, if your investment portfolio is focused on financial products, it could cause financial challenges. For example, you might need to sell off property and other investments to free up cash flow. 

The structure of your investment portfolio and the types of investment assets you have can affect your post-work lifestyle. 

Getting in touch with an investment professional with an Australian Financial Services Licence (AFSL) can help you reach your retirement goals and offer greater peace of mind.   

Step 4: Learn the Effect Debt has on Retirement Planning

When creating a safety net, it’s critical to learn about good and bad debt. You should also learn how to reduce bad debt. 

Types of debt can include:

  • Home loans
  • Investor debt
  • Personal debt
  • Credit cards 
  • Student loans of unique student identifier (USI) holders 

Good debt can help create long-term wealth. Good debt is typically connected to assets like homeownership, or  investment property including:

  • Retirement villages in Adelaide
  • Retirement villages in Brisbane
  • Retirement villages Sunshine in Coast 

Step 5: Learn How To Implement Plans

While planning for retirement is one of the building blocks for creating your dream future, taking action is what turns these dreams into reality. 

You should also combine the general advice of retirement planners with personal financial advice.

Seek such advice from financial advisers at companies with an ABN (Australian business number).

Retirement Planning Tips and FAQs

1. Am I Required to Retire By A Particular Age?

You can retire when you want. However, key factors you should consider include your financial situation, employment opportunities, superannuation plans, and health. 

2. How Much Money Is Required for Retirement? 

Industry figures indicate that individuals need about $44,200, and couples need about $62,400 yearly to fund a comfortable retirement. 

Another option is receiving a lump sum.  

3. What Recreational Activities Should Be on My To-Do List?

It’s important to allocate retirement money for your physical and mental health. These activities include hobbies, sports, and travel. 

4. How and When Will I Access My Superannuation?

In general, you can access your super after you reach the preservation age, which is between 55 and 60. You’ll have various options that are often tax-free. 

5. Do I Qualify for Government Entitlements?

You might qualify for government benefits including social security, the age pension, and disability pension.

6. Will I Enter Retirement Debt-Free?

If you are in debt when you retire, you should think of methods to quickly decrease this debt. Wise financial allocation is critical.  

7. Do I Need to Address Other Matters? 

These issues include life insurance, investment property, and estate planning.  

8. What Happens If I Relocate or Downsize?

When considering your options for retirement living, take into account your proximity to health services, your hobbies and activities, and not isolating yourself from a partner, friends, and family members. 

9. Do I Wish to Make Final Super Contributions?

You can use a retirement calculator to calculate your super fund contributions. You’re likely to have more money when you retire if you put more into your super before retirement. 

In addition, if you make a “salary sacrifice” and invest part of your before-tax income into your super, the government will generally tax it at 15%.   

A comfortable retirement depends on whether you’re able to make your super fund work for you. The first step is to monitor your super closely.

Need assistance in retirement planning? Request a call from our financial experts now!

References

Life expectancy continues to increase in Australia.   https://www.abs.gov.au/media-centre/media-releases/life-expectancy-continues-increase-australia/

Retirement and Retirement Intentions, Australia. https://www.abs.gov.au/statistics/labour/employment-and-unemployment/retirement-and-retirement-intentions-australia/latest-release

Retirement Income Review Final Report. https://treasury.gov.au/sites/default/files/2020-11/p2020-100554-00bkey-observations_0.pdf

Getting your super: Find out when you can access your super. https://moneysmart.gov.au/how-super-works/getting-your-super 

When you can access your super. https://www.ato.gov.au/individuals/super/in-detail/withdrawing-and-using-your-super/withdrawing-your-super-and-paying-tax/?page=2  

Retirement Income Review Final Report

.https://treasury.gov.au/sites/default/files/2020-11/p2020-100554-00bkey-observations_0.pdf

2015 Intergenerational Report. https://treasury.gov.au/sites/default/files/2019-03/2015_IGR.pdf

Amp/NATSEM Income Health Report

https://www.amp.com.au/content/dam/amp/digitalhub/common/Documents/Insights/News/AMP.NATSEM%2037%20Going%20the%20distance%20-%20Working%20longer%2C%20living%20healthier%20FINAL.pdf

ASFA Retirement Standard. https://www.superannuation.asn.au/resources/retirement-standard   

11. How much you can get. https://www.servicesaustralia.gov.au/individuals/services/centrelink/age-pension/how-much-you-can-get 

udgets-Dec2018.pdf.aspx?Embed=Y 

Age Pension. 

https://www.dss.gov.au/seniors/benefits-payments/age-pension

Super contributions 

https://www.gesb.wa.gov.au/__data/assets/pdf_file/0005/2588/contributions_form.pdf

Social security age pension overview. https://www.dva.gov.au/financial-support/income-support/support-when-you-cannot-work/pensions/social-security-age-pension

Salary sacrifice arrangement for employees.

https://www.ato.gov.au/general/fringe-benefits-tax-(fbt)/in-detail/employees/salary-sacrifice-arrangements-for-employees/

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This is a model, not a prediction. Amounts and repayment periods are estimates only, actual amounts may be higher or lower.

  • It applies to loans where your regular repayment includes both interest and the gradual repayment of the amount borrowed.
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This is a model, not a prediction. Amounts and repayment periods are estimates only, actual amounts may be higher or lower.

  • It applies to loans where your regular repayment includes both interest and the gradual repayment of the amount borrowed.
  • Initial inputs will be displayed on the left hand side of the graph. Your ‘What if’ scenario (if applicable) will be
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Disclaimers

Disclaimers

This is a model, not a prediction. Amounts and repayment periods are estimates only, actual amounts may be higher or lower.

  • It applies to loans where your regular repayment includes both interest and the gradual repayment of the amount borrowed.
  • Initial inputs will be displayed on the left hand side of the graph. Your ‘What if’ scenario (if applicable) will be
    displayed on the right hand side of the graph.

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Disclaimers

Disclaimers

This is a model, not a prediction. Amounts and repayment periods are estimates only, actual amounts may be higher or lower.

  • It applies to loans where your regular repayment includes both interest and the gradual repayment of the amount borrowed.
  • Initial inputs will be displayed on the left hand side of the graph. Your ‘What if’ scenario (if applicable) will be
    displayed on the right hand side of the graph.

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Disclaimers

Disclaimers

This is a model, not a prediction. Amounts and repayment periods are estimates only, actual amounts may be higher or lower.

  • It applies to loans where your regular repayment includes both interest and the gradual repayment of the amount borrowed.
  • Initial inputs will be displayed on the left hand side of the graph. Your ‘What if’ scenario (if applicable) will be
    displayed on the right hand side of the graph.

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Disclaimers

Disclaimers

This is a model, not a prediction. Amounts and repayment periods are estimates only, actual amounts may be higher or lower.

  • It applies to loans where your regular repayment includes both interest and the gradual repayment of the amount borrowed.
  • Initial inputs will be displayed on the left hand side of the graph. Your ‘What if’ scenario (if applicable) will be
    displayed on the right hand side of the graph.