Many workers want to continue in their job well beyond any expected or mandatory retirement age.
The decision to finish working can be a big one, ranking as highly as other life milestones including marriage, divorce, having children and buying a home.
And it can take a great deal of discussion, consideration and planning before you leave your job. Your financial security, desired lifestyle and enjoyment of employment will all play a part in your decision making.
Reasons for retiring
- Reached the mandatory age for retirement
- Need to care for partner or other family members, such as grandchildren
- Poor health, either yourself or other family members
- Too stressful or boring to continue in your current job
- Keen to enjoy hobbies, time with family or travel
- Received inheritance or other lump sum of money
Check your financial resources
If you have always had an income, or you and your partner have both had employment earnings to live off, it could be daunting to imagine what it might be like to have spare time but no regular pay coming into your bank account.
There are ways of investigating and estimating how much you might need to retire.
The Association of Superannuation Funds of Australia’s (ASFA) Retirement Standard has researched benchmarks that give a guide as to what you could need for a ‘comfortable’ or a ‘modest’ retirement.
The projections take into account home ownership, whether you want to travel overseas regularly or holiday in Australia, how old your car is and how often you like to eat out or enjoy leisure and sports activities.
You can try the Retirement Calculator to estimate how much money you may need and how much you might have when you retire.
Boost your retirement savings
If you’re concerned that your current (or projected) super balance may not allow you to enjoy the retirement lifestyle you would like, it’s worth considering ways you can increase your super while still working.
Salary sacrificing might be an option. You can discuss with your employer if you might be able to put extra money into your super from your pre-tax salary and/or bonuses. Instead of being taxed at your marginal tax rate, salary sacrifice contributions are taxed at just 15% for most people.
You might be eligible to claim a tax deduction for making personal super contributions - again these are taxed at just 15% for most people when received by your fund.
You could also consider making contributions to your super from your own after tax money and/or making a contribution to your spouse's super account - depending on the amount of the contribution and your spouse's income, you could receive a tax offset for doing so.
There are caps that apply to different types of contributions and extra tax may apply for exceeding these caps. You can check the Australian Taxation Office (ATO) website to ensure you know the current contribution caps so you can contribute tax-effectively.
Make a plan
Once you reach your ‘preservation age’ - from 55 to 60, depending on your date of birth – you can start thinking about how you might be able to transition to retirement, with access to some of your super while still working.
There are several ways you can choose access your super and this may impact the amount you’d like to retire with as well as when will be best to retire.