‘No longer black and white’: the changing way Australians are retiring
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Australians can start drawing an income from their superannuation at age 60 if they’ve stopped working, or 65 if they’re still working. This is known as the preservation age, and for many, it’s the big birthday that signals the end of their working lives.
Legislators have put a lot of thought into that age. The original preservation age was 55, but in the late 1990s, Australians were given about 20 years’ notice that it would be pushed back, to allow us time to plan accordingly.
The government has no plans to change the age again, but with more of us living longer (and therefore having more retirement years to fund), and many Australians returning to work in some form after we’ve retired, you might wonder if there’s an argument for tweaking the date further.
Craig Sankey, the head of risk and compliance at Industry Fund Services, thinks 60 is “about the right age” for Australians to be able to start accessing their super. As he sees it, the current preservation age “gives people flexibility and a bit of a choice”.
That’s because Australia doesn’t actually have a set retirement age. You can stop work whenever you want, as long as you can afford to do so. But you have to wait until 67 to access the age pension.
Having our super preservation age a little lower than the pension age gives Australians the flexibility to move into retirement the way they want. That’s a view shared by Peter Treseder, an education manager at AustralianSuper.
That ability to access our super sooner can be particularly useful for blue collar workers, who may not be able to keep working in physically taxing jobs until their late 60s.
Jemma Briscoe, an adjunct lecturer in finance at the University of Technology Sydney, who also co-runs a retirement advice service, Aged Care Gurus, agrees that being able to access an income sooner can be important for workers in physical jobs.
But there are also arguments for bringing the preservation age and pension age closer together. Aligning these, she says, could “allow us to stop certain behaviours occurring” – such as people making large, lump-sum withdrawals from their super, depleting their balances early on.
Briscoe adds that a primary concern among older Australians is the longevity of their super: “will they outlive their funds?”
A large gap between preservation age and pension age means some people spend a lot of their super in their early 60s.
Sankey says this is “probably not what the government was intending”.
If you can hold out on accessing your super, there’s a great incentive to do so.
“Superannuation is an extremely tax-generous vehicle to put your savings in,” Sankey says. “The one thing you’re giving up is access to the money to get all those tax benefits.”
We’re allowed to start accessing our super once we cease a work arrangement after the age of 60. However, Treseder says Australian Bureau of Statistics data reveals that in the 20 years to 2022-23, people retired, on average, at 61.4 years.
But the shape retirement takes is changing. Treseder says more Australians are transitioning to retirement by gradually tapering off work – perhaps initially dropping down to three or four days a week. “So that clear black and white between working and retirement has become shades of grey. “
Sankey also says he is seeing a lot more people initially drop down to part-time work, then topping up their income by drawing a small amount from their super. And Briscoe adds that many older Australians who’ve officially retired from the workforce now do unpaid work – either in the form of volunteer positions, or caring for ailing parents in their 80s or 90s.
“We do see that there is a general trend that there might be a change in the type of work they do, but with that, they might be still gainfully employed in some form,” she says.
Sankey says other Australians retire, only to find they miss the structure and stimulation of a job, and choose to return to the workforce.
“What we find is a lot of people love the idea of retirement, especially if they don’t like their job,” he says. “They like to think retirement is going to be great, but unless they’ve really planned ahead, they find after a period of time that it might not be as great as they first thought. And if they can go back to a part-time role or get new employment that they enjoy, that’s a really big win for them.”
There is also a cohort of Australians who retire and then return to work because they find they need more income.
Working with a financial expert can help you navigate the transition to retirement and find an approach that works for you. It can also help ensure you’ve got enough money to fund the retirement lifestyle you’d like, so you’re not forced back into work for financial reasons. The good news is that if you’re with an industry super fund, your super fund will have experts on hand who can help you navigate this period of your life for low or no cost.
And the benefits of thinking ahead can be huge.
Treseder says: “Moving into retirement is a big step, and our research shows that the better you’ve planned for it, the better your outcome is going to be, or can be.”
Briscoe says to really nail your retirement, you’ll want to plan for factors such as where you want to live and how you want to spend your days.
“We need to be able to have self-advocacy and self-agency and be able to choose where we would like to live, in an environment that we feel engaged,” she says. “We know isolation is one of the biggest concerns within the community, particularly for older Australians.”
As Briscoe sees it, three things make or break our golden years: “Are there sufficient funds? Where would you like to age? And are you engaged? And I think if you can get those three things right, you can really have a very active and happy retirement.”
The information provided in this article is of a general nature only and does not constitute financial or other advice. It is important to consider personal objectives, financial situations or particular needs when making financial decisions.
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