An early retirement is the dream for many Aussies but is it achievable for those of us dreaming of leisurely days spent in the garden, playing a round of golf every week, or travelling?
To make early retirement a reality, careful planning and financial know-how are essential.
This blog provides financial tips and strategies to help you achieve your dream of retiring early. We’ll cover what factors you need to consider, including if you can access your superannuation and age pension.
How to retire early in Australia
The old cliché of ‘start early’ is particularly important if you wish to retire at the age of 55.
Firstly, retiring early means you have a shorter working life to accumulate the necessary financial assets such as superannuation, savings and investments.
Because you’ll be funding a longer retirement, you usually also need a lot more financial resources so that you can spend your retirement doing the things you really love.
It’s crucial to account for a longer retirement – not just financially but mentally. Have you thought about the types of activities that will help you stay fit both physically and mentally – and the financial outlay associated with your interests?
Retiring is a big mental shift for many people, especially for those who have worked hard for their entire life, retirement can be a real shock to the system despite most of us longing for it for decades.
Remember, 55 is very young to be sitting at home without a 40 hour+ week job driving your calendar. So, getting on the front foot early, being honest with how you want to spend your twilight years will set you up for early retirement success.
Retiring Early Australia: Is retiring at 55 considered an early retirement?
When it comes to retiring early in Australia, in the 1960s and 1970s, 65 was a common age for retirement. Back then superannuation wasn’t a thing, and this was the age when you could access the age pension.
Back in that era, the life expectancy then was 67 (for a male) and slightly higher for a female. Nowadays, we have a much longer life expectancies, but people are wanting to retire earlier.
This means planning for a potential retirement that lasts 40 years, even longer than your working life. Given it could be a such a significant portion of your life, it requires appropriate planning.
How much will I need?
This is impossible to answer as everyone is different. Generally speaking though, you would want your principal residence paid off and a certain amount of financial assets to support yourself for your retirement years. The amount you need though can vary considerably, because if you have more modest income goals, the age pension can do some of the heavy lifting from age 67 but if you want a very comfortable retirement income, you may be fully self funded for your entire retirement. Either way though, to retire at 55, you will need to be fully self funded for at least 12 years. Even the most modest retirement plans income goals would need at least $1,000,000 in financial assets to be able to retire at 55 but realistically, it would be more like $1,500,000 – $2,000,000 for a reasonably decent level of income throughout retirement with travel and car upgrades along the way.
Can I access my super if I retire at 55?
Unfortunately, the answer is no.
The preservation age (the age you can access your super) has been moving up to 60 and anyone who is 55 today cannot access their superannuation until age 60.
Retiring at 55 Australia: the need for professional financial advice
To retire at 55, you cannot solely rely on your standard employer super contributions or the age pension (even if you plan on retiring later you shouldn’t rely on just that.)
To retire at 55, you must have accumulated reasonably significant assets outside your home and your superannuation.
Not only that, to be fully self-funded through to 67 (any beyond with a reasonable standard of living because let’s be frank, the age pension isn’t much), you need to have significant assets across both superannuation and non-superannuation investments.
Professional help to work out how much you need – and how to get there – in the most tax-effective manner can be a gamechanger for how much freedom and flexibility you have to enjoy your later years.
Early Pension Australia
It possible to access the age pension early?
Sadly not. You cannot get the age pension until 67, and that age might go up further in the future.
There are also income and asset tests associated with the age pension, so retiring earlier might see you to need to draw down your assets up until the age of 67. Having nothing left at 67 and being solely reliant on the age pension is not ideal as it doesn’t provide much disposable income for an enjoyable retirement from age 67.
Dreaming of an early retirement?
Pursuing the goal of retiring early is achievable, but it is important to do your own research and seek professional advice.
Understanding your own financial situation, calculating how much money you need to save, and keeping an eye on your superannuation balance are all key.
Remember that you are never too young to start planning for retirement, so set yourself up for success by creating a plan and sticking to it.
With the right strategies, you can make your retirement dreams a reality.
DISCLAIMER – The information provided in this blog is general and does not consider your individual financial needs or objectives. It does not constitute personal advice. We recommend seeking out professional and independent financial, legal and tax advice which has been designed for your individual situation before acting on any information contained below.
Precision Wealth Management is a local, privately-owned financial planning firm based on Brisbane’s northside.
Our certified advisors work with each individual client to determine the best wealth creation strategy based on their unique situation.
We strive to stay at the forefront of the industry, and our investment approach is based on decades of research.
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Our services include Superannuation Advice And Planning, personal Insurance Advice, Budgeting And Cashflow Management, Investment Strategy And Advice, Aged Care Financial Advice, Retirement Planning Advice, and Debt Reduction Financial Planning.
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