Picking the perfect retirement age
Your retirement age is a very personal thing. Sometimes retirement is thrust upon us. We might lose our job or be forced to leave work due to ill health or caring responsibilities. Most people, however, are in the fortunate position of being able to choose when to retire.
The many people I have talked to on this subject usually put the decision down to one or two key factors.
- ‘I want to keep working while I still enjoy my job, while I am still able to do it well and feel productive’
- ‘I want to retire as soon as I can afford to do so’
The first reason is extremely important. You are a long time retired so feeling productive and that you are making a difference matters to a great many people. But you don’t necessarily need to keep working to achieve that. Hobbies, time with family and volunteering are just some of the many ways people can feel they are making a contribution. And others just relish the free time to do more of what makes them happy. Just as there is no need to retire if you are happy and love your job, there’s also no need to keep working in a job you dislike if you can afford to do something else.
Which brings us to the second point.
How soon can I afford to retire?
There is also no single answer to this. It comes down to three things:
- the lifestyle you want in retirement,
- how much it will take to pay for that lifestyle, and
- the resources you can draw on to fund that lifestyle.
Most people don’t dramatically change their lifestyle in retirement. Of course they are no longer working so they have more ‘free’ time, so some things change. But when it comes to money, people don’t tend to change from extremely thrifty to wildly extravagant, or vice versa, when they retire. Our tastes and preferences are well established. We might want to travel more, perhaps buy a new car or renovate the house. Spending day-to-day however is often likely to be a little lower as children will have grown up, the mortgage will be repaid or lower and you don’t need to travel to and from work. Spending is also often higher in early retirement, but tends to settle down after that.
Many experts suggest most people should plan to spend around 70% of what they spent pre-retirement. This is just a rule of thumb, however, as some will spend a lot more and others a lot less.
Do you know if you can afford to retire?
This is actually much trickier than you might think. It’s important to understand all the resources you can draw upon.
We have written previously about the five pillars of retirement income?
- The Age Pension – you can get this from age 67 if you meet the means and residency tests
- Superannuation – you can access this from age 60
- Non-super investments
- Part-time work
- The family home
Virtually everyone will rely on at least one of these sources. Often they will have access to several. But how do you manage all those sources and get them working together. Most people struggle to understand Centrelink’s rules and the ever changing superannuation sector. So its difficult to calculate out how to get all these sources, or even just a couple, working together. A Retirement Forecasting appointment can help you to do this. Our advisers can calculate where your income will come from, how it combines from other sources and how much you can safely spend each year in total.
So what is the perfect retirement age?
There isn’t one age that works for everyone. Two common retirement ages are 60, when you are able to access your super, and 67, which is Age Pension age. They are common as they give you access to sources of retirement income that were not previously available. Often people choose to start their retirement as a self-funded retiree, perhaps relying on superannuation initially. As they get older or spend their super, the Age Pension might start to kick in.
Most people will get at least some Age Pension during their lifetime. At age 67, over 60% of people get at least a part-Age Pension. By age 80, over 80% of people get at least a part-Age Pension. Many people are able to supplement their Age Pension payments with money from super, other investments, and part-time work, particularly in early retirement. And for homeowners, reverse mortgages and other equity release schemes are becoming more common as they allow people to remain in the family home if they don’t want to downsize.
There are emotional and financial factors to consider. And they aren’t mutually exclusive. You may enjoy your work but want to cut back to part-time. But can you afford it? Perhaps you no longer want to work but are hanging on as you are worried you don’t have enough put away. We can help in a number of ways.
- Retirement Forecasting (look at what your income, assets and spending could look like over your retirement).
- Understanding more about super (get the most out of your super in retirement).
- Maximising your entitlements (making the most of your financial resources and Centrelink)
- Understand impacts of your home mortgage (assess the benefits of repaying, or maintaining your mortgage?)
So how about you? Have you already retired and if so at what age and why? Do you have advice for others? Perhaps you are still working, if so have you thought about when you would like to retire?
Yes, I am finding it difficult to decide when to retire, I will be 69 next week and still working 2 days a week.
It is not work that is keeping me there, it is not knowing if I have enough to live on after retirement.
HI Graeme, that is a great point you make and many other seniors have the same doubts and concerns. We can help you forecast your future spending so you can see when would be the ideal time to retire. To make a booking CLICK HERE.
I retired at age 75. Due in part to minor health problems (knee’s) as work was quite physical. Since then, which allows me a comfortable life. I own my home which i9s a big consideration I have Super providing some income and if I ever get it the aged pension will give me a weekly income of just under $1000. Also owning my house is a big consideration.
I’m 57 with $400k cash in the bank and $700k in super – id like to retire now and maybe work at a cafe job or retail 1 or 2 days a week? would this be viable with my finances or am I dreaming
Hi Sally, this is an important situation to consider so that you are confident you will be safe in the long run. Our consultation service can go through this scenario with you so you can find out. To make a booking CLICK HERE.
Hi, My wife (64) has taken an early retirement…but not drawing down on her Super ( $1.1mill)….l am still working (65)….as l love my work…. ecologist…..we won’t receive a pension as investments preclude any Centrelink benefits…..we don’t mind this as we believe benefits should be for those less fortunate….that said we live a relatively simple lifestyle…gardening….friends over…. coffee and lunch out a couple of times a week….my only real indulgence is a monthly whole day deep sea fishing trip…..l think living within ones means is the key….and owning your own home….be ever it so humble
I retired at 58. It was an unintentional event, as factors such as the inability to find a suitable part-time role (“You are too overqualified for this role and therefore a flight risk”, or “We can’t pay anywhere near what you were getting in your last role”), despite me telling prospective employers that I no longer was looking for high stress/high pay roles. The other reason was that I was in a good situation financially to retire as a self-funded retiree.
I always thought I’d be bored in retirement: how very wrong I was! I am an artist, so creating art keeps me busy, and I also started a social group for retirees over 60: we go to galleries, walks, brunches, theatre, etc.
If you can afford to: RETIRE and start enjoying life!
Will we ever qualify for the health care concession card ?
My wife and l are both self funded retirees at present & I intent to access my super at age 60 in July 2025, my wife same in 2026.
My wife and l are comfortable financially, no mortgage, healthy private cash & share accounts, & both with SMSF Acc’s well in excess of the current cap ceiling. Why and how ?
Because the government made it clear many yrs ago that people needed to care take of themselves in retirement and not rely on the pension. Now they want to up the anti on that position taken and help themselves to the results of wise decisions made by the likes of ourselves for the long term. Beauty, Not.
Our question is – as much s we’re happy to take care of ourselves in retirement without imposing a burden on the pension system, having been recently informed, why is it that we will not receive the same entitlements to reduced health care costs as others ?
Or how do we enable that entitlement to occur ?
Hi Pete, you may be eligible for the Commonwealth Seniors Health Card as there is no asset test involved, only income and the threshold is quite high at +$150k for a couple.
It could be worth your while to check to see if you are eligible for the Lower Income Health Care Card (LIHCC). If you are not earning much income, with deeming rates quite low you can have as much as 2.3 million in Super and other account assets and still qualify. In many states there are utility discounts as well. It is pretty handy to have.
I retired at 65 as my job was becoming too hard with 12 hour days and the physical side of the job was wearing me out, so downsized no mortgage used money left in the business to live till we qualified for part pension plus super
Hi, we are both 67, having TTR accounts set up Y-2012 (now combine #750K) plus all other asset is # 880K in total. We are both work part time earn 60K and receive 42K (TTR) per year. As planned, my wife retire next year. After she retired our total income is #85K (42K TTR + 43K empl). For age pension (if she apply) our total asset and income are under threshold for a couple with home owner. Does Centrelink treat a ‘deemed’ income #17K on 880K and 42K (TTR) are both as income or just 17K is a real one?. Thanks.
Hi Ken, great question! Thankfully Centrelink only assess the $17k deemed income, not the amount you are drawing.