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Guidance

When is the right time to retire?

When is the right time to retire?

The idea of retiring at a particular age is not something that will suit everyone.

Many workers want to continue in their job well beyond any expected or mandatory retirement age.

The decision to leave can be a big one, ranking as highly as other life milestones including marriage, divorce, having children and buying a home.

Financial security can be one of the biggest issues you might face in making the decision as to when the right time to retire might be.

It can take a great deal of discussion, consideration and planning before you leave your job.

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.

If you are a high income earner, one way of estimating how much money you might need in retirement would be to assume you need 67%, or two-thirds, of your income before you retire to maintain the same standard of living when you are retired, according to the Australian Securities and Investment Commission (ASIC) MoneySmart website.

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

It’s never too early or too late to boost your retirement savings and there are a number of ways you can consider topping up your super while you are 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 also 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 - depending on your income, this may qualify you for a government co-contribution of up to $500.

Another option is to make 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 of up to $540 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.

Finding any lost super

Find any lost super that might be in other accounts that you might have forgotten about by contacting the ATO.

If you’re an Essential Super customer and have provided your tax file number (TFN), you can ask for a SuperMatch search of the ATO data base at no cost.

This can find any other super accounts you might have and any money being held by the ATO on your behalf and you can choose to consolidate this if you want to.

Bringing all your super into one account can simplify managing your super and you might avoid paying multiple sets of fees.

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.

Talk to a financial planner to consider all your options and take control of your saving and investing needs to help you get the lifestyle you want after you stop working.

This article is intended to provide general information of an educational nature only. It does not have regard to the financial situation or needs of any reader and must not be relied upon as financial product advice. Investors should consult a range of resources, and if necessary, seek professional advice, before making investment decisions in regard to their objectives, financial and taxation situations and needs because these have not been taken into account. Past performance is not indicative of future performance. Commonwealth Financial Planners are representatives of Commonwealth Financial Planning Pty Ltd ABN 65 003 900 169 AFSL 231139 a wholly owned but non-guaranteed subsidiary of the Commonwealth Bank of Australia ABN 48 123 123 124 (the Bank). Colonial First State Investments Limited ABN 98 002 348 352, AFS Licence 232468 (Colonial First State) is the issuer of interests in Commonwealth Essential Super ABN 56 601 925 435. This information is not financial product advice and does not take into account any person’s individual objectives, financial circumstances or needs. You should read the Product Disclosure Statement (PDS) for Commonwealth Essential Super and consider talking to a financial adviser before deciding whether to acquire or continue to hold this product. Download the PDS (https://www.commbank.com.au/content/dam/commbank/personal/apply-online/download-printed-forms/EssentialSuper_PDS.pdf), collect one from any branch of the Commonwealth Bank or call us on 13 4074 and we’ll post one out to you. Colonial First State is a wholly owned subsidiary of 'the Bank'. The Bank and its subsidiaries do not guarantee the performance of Essential Super or the repayment of capital by Essential Super. An investment in Essential Super is via a superannuation trust and is therefore not an investment in, deposit with or other liability of the Bank or its subsidiaries. An investment in Essential Super is subject to risk, loss of income and capital invested. Before you make a decision about your super, you should compare the costs, fees, risks and benefits of super funds. It makes sense to consider whether you can replace any insurance cover you may lose when you bring your accounts together, as well as any costs for withdrawing from other super funds and any investment or tax implications. Taxation considerations are general and based on present taxation laws and may be subject to change. You should seek independent, professional tax advice before making any decision based on this information. Commonwealth Bank is also not a registered tax (financial) adviser under the Tax Agent Services Act 2009 and you should seek tax advice from a registered tax agent or a registered tax (financial) adviser if you intend to rely on this information to satisfy the liabilities or obligations or claim entitlements that arise, or could arise, under a taxation law.