Is 2022 your year to retire?
Understand important dates
There is no fixed age for retirement. You can hang up your work boots whenever you choose though a few dates may shape your decision.
Once you reach your preservation age, that’s between 55 and 60 depending on when you were born, you can start a transition-to-retirement income stream (TRIS). This is a superannuation pension stream that you can draw on while you’re still working. It can be a way to scale back working hours and plan effectively for your retirement. Then, from age 65 you can start drawing on your super even if you’re still working.
The age pension is available (assuming you’re eligible) from age 66 years and 6 months for people born between 1 July 1955 and 31 December 1956. If you were born after 1 January 1957, you’ll have to wait until you turn 67.
Clear debts
People often focus on giving their super and other investments a last-minute boost before retiring. Yes, that matters. But it’s also worth entering retirement with as little debt as possible.
Paying down debt means more of your money goes to your lifestyle instead of your lender.
Work out likely living costs
Draw up a retirement budget to understand how much you’ll need to live on. The latest estimates from the Association of Superannuation Funds of Australia suggest it costs a single person $28,775 annually to fund a modest retirement lifestyle, or $45,239 for a comfortable lifestyle.
Couples can expect to spend around $41,446 annually for modest living versus $63,799 for a comfortable retirement. These figures assume you own your home debt-free.
Get to know your financial resources
Retirement income can come from a variety of resources including the age pension, personal investments, super and even the family home.
How you use your super deserves careful thought. Taking a lump sum means shifting money out of super’s very low-tax environment. By contrast, using your super to invest in a personal income stream such as an account-based pension, delivers ongoing tax savings and provides regular payments making budgeting easier.
Invest in good advice
Deciding how to use your super can call for professional financial advice. For many Australians, retirement is the first time they have a large sum of money to tap into – and it can be pretty scary. With retirement money you get no second chances, so you need to choose wisely.
Paul Clitheroe is Chairman of InvestSMART, Chair of the Ecstra Foundation and chief commentator for Money Magazine.
InvestSMART has a range of tools that may be able to help, try this retirement savings calculator or you can try the more comprehensive statement of advice.
Frequently Asked Questions about this Article…
There is no fixed age for retirement in Australia. You can retire whenever you choose, but important dates like your preservation age and eligibility for the age pension can influence your decision.
A transition-to-retirement income stream (TRIS) is a superannuation pension stream that you can start once you reach your preservation age, which is between 55 and 60 depending on your birth year. It allows you to draw on your super while still working, helping you scale back work hours and plan for retirement.
If you were born between 1 July 1955 and 31 December 1956, you can start receiving the age pension at 66 years and 6 months. For those born after 1 January 1957, the age pension is available from age 67, assuming you meet eligibility requirements.
Clearing debts before retiring is important because it allows more of your money to go towards your lifestyle rather than paying lenders. Entering retirement with minimal debt can significantly improve your financial security and quality of life.
According to the Association of Superannuation Funds of Australia, a single person needs about $45,239 annually for a comfortable retirement, while couples need around $63,799. These figures assume you own your home debt-free.
Retirement income in Australia can come from various sources, including the age pension, personal investments, superannuation, and even the family home. It's important to plan how you'll use these resources to ensure a stable retirement income.
Taking a lump sum from your superannuation means moving money out of a low-tax environment. Alternatively, using your super to invest in an account-based pension can provide ongoing tax savings and regular payments, making budgeting easier.
Professional financial advice is crucial for retirement planning because it helps you make informed decisions about using your super and other resources. With retirement money, you get no second chances, so it's important to choose wisely to ensure financial security.
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