19 July 2022
Having to retire unexpectedly can put a dent in your retirement plans and knock your confidence. But you may be more ready than you realise – both financially, and in terms of embracing your new lifestyle. Find out how to prepare for an unexpected retirement.
A significant number of Australians retire before they intend to. According to the Australian Bureau of Statistics (ABS), the average age people plan to retire is around 65 years old. But the actual average retirement age is closer to 55 years1.
Unexpected circumstances such as redundancy, ill health, being unable to find work, or having to care for a loved one are all reasons retirement can come sooner than planned.
Planning your perfect retirement
The ideal retirement will look different for everyone. For some, it’s a holiday every year or a campervan road trip. For others, it’s volunteering in the community or simply spending more time with the grandchildren. Either way, some planning and goal setting can really help.
4 actions to take for an unexpected retirement
1. Review your current financial position
If you had to retire today, how is your retirement balance looking? Knowing how much money you could have available if you stopped work unexpectedly is a good first step in your planning.
Consider your assets when you’re reviewing your finances, as well as any government assistance. For example:
- your superannuation
- any savings you have
- income from personal investments such as shares or property
- your eligibility for the Government Age Pension.
2. Calculate your living expenses
Once you understand your assets and income sources, it’s a good idea to calculate your living expenses to estimate how much you’ll need to spend each year in retirement. This often includes bills, food and entertainment, holidays, insurance home or car repairs, and health expenses.
It can be hard to know how much super is enough to last you in retirement, or if your savings will give you the lifestyle you want. Use our super projection calculator to see how much income you could have in retirement. You can also see how adding extra money to your super could increase your balance over time.
3. Know when you can access your super
Super is usually held back until you reach a minimum age called your preservation age. This is set by the government. Currently, the preservation age is between 55 and 60, depending on when you were born.
Calculating 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|
To access your super you need to have reached preservation and also:
- have permanently retired, or
- want to transition to retirement while you’re still working, or
- have changed jobs on or after turning 60, or
- have turned 65 (even if you’re still working).
In some cases, such as financial hardship, compassionate grounds, or if you’re a temporary resident who’s leaving the country, you may be able to access your super early before your preservation age.
4. Explore how to turn your super into a regular income – account based pension
If retirement comes unexpectedly and you’ve reached preservation age you have a few options. These include taking your super as a lump sum or moving it to a specially designed retirement account, such as an account based pension. With an account based pension you can:
- Receive regular income payments from your super – similar to receiving a salary or pay-check from your employer
- Access extra money from your super for whatever and whenever you need
- Keep your money invested where it has more time to grow.
Get professional financial advice
Retiring earlier than planned means relying on your super for longer. This can be daunting, but don’t worry. Speaking to a financial adviser can help you understand and feel more confident in your finances. It’s often hard to see what’s possible, but the earlier you start planning, the more control you will have.
For AustralianSuper members, there are several education and advice options available, including free retirement webinars. These provide an insight into planning and managing your finances. We also offer members different types of advice to suit the level of help you’re looking for. This ranges from simple super advice to putting you in touch with a trusted and qualified financial adviser.
Feel confident as you approach retirement
Retiring unexpectedly can be stressful and knock your confidence. Dr Eraj Ghafoori, a behavioural economist at AustralianSuper, says it’s a common belief that if you don’t have enough money by retirement, you’re in trouble. But that’s not necessarily the case. A study by AustralianSuper and Monash University shows retirement confidence is affected by 4 key factors:
- Financial awareness and skills
- Health and wellbeing
- Social connectedness
- Retirement awareness and planning.
Dr Eraj Ghafoori, a behavioural economist at AustralianSuper, says it’s a common belief that if you don’t have enough money by the time you retire, you’re in real trouble. But that’s not necessarily the case.
Explore the Retirement Confidence Index to see how Australian’s feel about retirement.
Investment returns are not guaranteed. Past performance is not a reliable indicator of future returns.
This may include general financial advice which doesn’t take into account your personal objectives, financial situation or needs. Before making a decision consider if the information is right for you and read the relevant Product Disclosure Statement, available at australiansuper.com/pds or by calling 1300 300 273. A Target Market Determination (TMD) is a document that outlines the target market a product has been designed for. Find the TMDs at australiansuper.com/TMD.
AustralianSuper Pty Ltd ABN 94 006 457 987, AFSL 233788, Trustee of AustralianSuper ABN 65 714 394 898.