The perfect retirement will look different for everyone, but what people do have in common is the need to have some sort of plan in place. A recent study into retirement confidence has shown that this can help you to feel more confident about your retirement, both financially and mentally.
Before you start planning your retirement, it's important to take some time and think about what you want your retirement lifestyle to look like. Do you want to embark on a travel bucket list or maybe just explore your state? Do you want to retire fully, or do you plan on working part-time for a few years? Or maybe you have some home renovation plans and want to finally perfect your hobby. The best thing about retirement is that it’s your choice.
Setting clear goals and developing a plan will help you achieve your vision - a good place to start is with these 6 steps.
1. Know when you can access your super
Let’s talk about age. There are two important numbers that you need to know about: your Preservation Age and your Qualifying Age - there’s a difference between the two.
Your Preservation Age
|Birth year||Age you can access your super|
|Before 1 July 1960||55|
|1 July 1960 to 30 June 1961||56|
|1 July 1961 to 30 June 1962||57|
|1 July 1962 to 30 June 1963||58|
|1 July 1963 to 30 June 1964||59|
|1 July 1964 or after||60|
Your Qualifying Age
This determines when you can apply for the Government Aged Pension. Your Qualifying Age is higher than your Preservation Age, because even if you’ve reached the age where you can access your super, you still might not be old enough to qualify for the Age Pension. There are several eligibility requirements you need to meet, including residency status and income.
Use the following table to find your Qualifying Age:
|If you were born...||Your qualifying age is|
|Before 1 July 1952||65 years|
|From 1 July 1952 to 31 December 1953||65.5|
|From 1 January 1954 to 30 June 1955||66|
|From 1 July 1955 to 31 December 1956||66.5|
|On, or after 1 January 1957||67|
2. Consider how much you’ll need for your retirement
The right time to retire doesn’t just come down to your age. Your current and future financial needs should also be a key consideration in your decision.
Think about the type of life you want to lead in retirement, this will help you estimate how much your retirement years may cost. This can also depend on whether you’re single or in a relationship. For an idea of how this can impact your retirement planning, the Association of Superannuation Funds of Australia (ASFA) have published a detailed retirement budget breakdown.
Example: Retirement budget breakdown
|Expenditure Items||Single person||Couple||Single person||Couple|
|Electricity and gas||$36.95||$49.62||$46.81||$58.05|
|Household goods and services||$33.90||$39.84||$74.29||$91.66|
|Clothing and footwear||$20.49||$38.94||$27.37||$50.97|
|Total weekly expenditure||$540.62||$780.06||$846.42||$1,196.08|
|Total annual expenditure||$28,220||$40,719||$44,183||$62,435|
Data source: Association of Superannuation Funds of Australia (ASFA) Retirement Standard – March quarter 2020
A clear idea of how much the average person or couple spends in retirement can help you plan your finances. You can also use the AustralianSuper Super Projection Calculator to get an estimate of how long your super may last.
It’s never too late or too early to take steps to maximise your super. While you’re still working, consider making voluntary contributions to your super to grow your balance. Even adding small amounts can make a huge difference over the long term. Any extra contributions could also be tax deductible.
3. Understand your retirement income options
There are 3 main sources of potential income in retirement: your super, the Government Age Pension and any assets you have.
Even when you reach your preservation age you can keep your super working for you. Depending on your circumstances, whether you want to retire or keep working, there are options to consider.
Account based pension – paying yourself from your super
Did you know that you don’t need to take all your super out at once?
The option of an account based pension allows you to draw a regular income from your super while it continues to stay invested. You can also access extra money whenever you need it.
AustralianSuper’s award-winning1 account based pension is called Choice Income.
Government Age Pension
Around 62%2 of Australians over the age of 65 receive either a part or full Government Age Pension. The Age Pension is a regular fortnightly payment which can provide you with a supplementary income once you’ve retired, if you’re eligible.
To be eligible for the Age Pension you must meet the age and residential requirements and pass the income and asset test. If you’re eligible, your Age Pension payments can supplement your income payments from your super.
Personal savings and assets, such as property and shares, can also make up part of your income in retirement. It’s good to understand the role that your assets play in your retirement plan.
For example, one option available to Australian homeowners is downsizing. If your home is too big for your needs in retirement and you downsize, you may be able to contribute money from the sale of your primary home into your super.
Continue to work in retirement
While your Preservation Age and Qualifying Age determine when you can access your super or apply for the Age Pension, it is up to you to decide when you retire. For many people reaching Preservation Age comes before they’re ready to stop working. Transitioning into retirement slowly offers a balance between finishing your working life and entering retired life.
An easy way to keep working and start accessing your super once you’ve reached Preservation Age is to open a TTR Income account alongside your regular super account. A TTR Income account gives you the flexibility to top up your take-home pay, so you can work less or save more.
4. Discover your retirement confidence score
AustralianSuper and Monash University surveyed over 3000 people aged 50 and over to see how confident they feel about retirement.The study found that there are 4 key factors to feeling confident in retirement including:
- financial awareness,
- health and wellbeing,
- social factors,
- and retirement awareness and planning.
The average score for Australians in, and approaching retirement was 63 out of 100, and the study found that people in retirement reported higher levels of confidence than those approaching retirement.
Discover your own score, and read more about the findings with the Retirement Confidence Index tool.
5. Check your insurance cover
While most super funds offer automatic insurance, it's important to make sure that your insurance cover is right for you. As you get older, your needs change. This might mean your current level of insurance could be too much or too little.
Certain situations might be a good opportunity for you to reconsider your cover including your adult children moving out or a change in your relationship status.
Depending on where you’re at in your life you might consider the following cover types:
- Income Protection
- Total & Permanent Disablement (TPD) cover
- Death cover (also known as life insurance)
It’s important to note that insurance cover is not included with the Choice Income or TTR Income accounts. For this reason, some members choose to maintain their super account so they can access their existing cover.
6. Ask for advice if you need it
AustralianSuper offers a range of advice and support to help you plan your retirement, including webinars from our education team.
These free videos give some simple insight into how to plan, and what you need to focus on, to help you learn about retirement planning.