There is no legislated retirement age in Australia. Preserved superannuation can be accessed from age 55 for those born before 1 July 1960, increasing in yearly increments to age 60 for those born on or after 1 July 1964.
The government Age Pension is currently accessible from age 65 for men and 64 for women, but this will gradually increase to age 67 for both sexes for people born in 1957 or later and is set to increase to age 70 by the year 2035.
Planning for retirement can pertain to financial planning (of income streams such as superannuation, the Age Pension and other investments), and other post-retirement activities such as care-giving, social and community involvement, a change in residence (e.g. downsizing to a smaller home, sea-change or tree-change), hobbies, travel, and study.
It makes sense that individuals with a clear sense of direction for financial security, social engagement, intergenerational connections, and life-long learning enjoy retirement more. However, such goals must be carefully thought through with plans put in place well before retirement in order to create the desired outcomes.
From an organisational perspective, knowing the retirement intentions of your workforce can be beneficial in order to allow for knowledge transition and overall workforce planning. This is particularly the case if you have a workforce that is collectively mature in age and likely to retire within a short time period of each other.
Offering retirement planning (in regards to finances and lifestyle activities) will also set you up as an employer of choice and will be likely to boost overall job satisfaction and retention of staff.
From and individual perspective, employees may want to consider a transition to retirement plan, such as reducing their hours prior to ceasing employment altogether.
A ‘Transition to retirement’ pension allows a person of preservation age to earn a pension from their superannuation while still working. Also, for a person aged at least 60 years, benefits from a taxed super fund are tax-free.
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People who are eligible for the Age Pension are still able to work and receive their Pension. The income test for the Age Pension allows a single person to earn $156 per fortnight, and a couple to earn $276 combined, without the Age Pension being reduced.
Any income earned above this amount reduces the Age Pension received by 50 cents for each dollar earned. Additionally, the Work Bonus allows people eligible for the Age Pension to earn $6500 per year without it being included in the income test for the Age Pension.
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Effective retirement planning - finances
There are two ways to approach financial planning for retirement:
- establishing a set time when you wish to retire and working out how you can achieve that target date based on your assets
- work out how much money you will need to retire on and plan your retirement around that financial target
Either decision will require the consideration of estimated life expectancy, which is commonly underestimated by people.
There are many online life expectancy calculators (see the Resources section) which ask questions on current health status and lifestyle behaviours as well as family medical history. Knowing your estimated life expectancy can help you plan to have adequate financial resources for the entirety of your retirement.
In addition, the Australian Securities and Investment Commission provide a Retirement Calculator (see the Resources section) to help you consider the following financial issues:
- What income you are likely to have from superannuation and/or the Age Pension after you retire
- How contributions, investment options, fees and retirement age affect your retirement income from superannuation
- What actions you can take to boost your superannuation and overall retirement income
It is recommended that individuals ensure adequate personal financial literacy, that means ensuring they are aware of and understand their financial options. It is also recommended that individuals consult a financial adviser.
As an employer, your organisation may hold seminars or invite speakers such as superannuation consultants or financial advisors to present to your staff and encourage such financial literacy.
Effective retirement planning – life activities
For many people whose job represents a key component of their personality and character, retirement can involve a deep sense of loss of professional identity and social status which can lead to anxiety and depression.
Loss of identity after retirement can be related to:
- Loss of status
- Loss of job
- Loss of title
- Loss of professional accomplishments
- Loss of structure and routine
- Loss of social and professional networks
- Changing lifestyles after retirement
- Coping with life transitions
- Physical changes
- Financial changes
However, the life transition of retirement can be both manageable and enjoyable when planning has taken place. Below are seven stages to consider when planning for retirement. Note that not everyone will experience these.
Grieving – involves a mourning process of the loss of corporate identity
Excavating – involves unearthing parts of yourself that were put on hold over the years due to career demands
Exploring – involves exploring new self-identities possibly without job, title, and business contacts
Networking and relationships – involves developing new networks and relationships through volunteering, remaining connected to professional organisations, social and civic engagement, and through creative outlets such as book clubs, sporting groups or other special areas of interest. Keep in mind that relationships with spouses/partners can sometimes change with this life transition.
Exiting - traditional full-time and sudden retirement is no longer relevant with options to consider such as the gradual reduction of hours and/or professional responsibilities, becoming a consultant, taking a sabbatical, and combining work and volunteering or creative endeavours and hobbies.
Structuring - involves building structure into non-work activities as it can be a challenge to suddenly deal with the unstructured landscape of retirement. This involves a move from outward directed structure to self-directed structure such as organising places to go, routines, goals, meetings, and building a culture.
Purpose – people may miss the bond of a sense of purposefulness within the work environment, of working toward common goals and solving problems with others. For many, work provided the opportunity to translate talents into creative, valuable products and may find their sudden lack of importance and control results in frustration and humiliation.
Transferring a sense of personal purpose that is outside the work environment will require consideration, planning and focus.
To successfully put retirement plans in place, consideration of the following is recommended:
- clarify your goals – try to be as realistic and specific as possible
- benchmark your current position
- convert your goals into a plan of action
- convert this plan of action into achievable steps
- implement initiatives to achieve goals
- set a date to reassess and make adjustments if necessary
There are many blogs written by retirees which share their personal experiences and offer advice to manage the transition. There are also online forums and retirement groups which individuals may wish to consider joining.
For more information, refer to Gradual Retirement in the Flexible Work Options section.
For a full list of resources outlining retirement programs, click here.