Early retirement on the cards for millions, and planning is vital

Superannuation fund research has found forced early retirements are impacting older Australians, so planning is vital. TAKE OUR POLL

Two out of five Australians are being forced into retirement years earlier than planned, a new analysis has found, prompting warnings for people to prepare back-up plans for their super and wealth.

Aware Super says the phenomenon could impact 1.4 million of the 3.5 million Aussies set to retire in the next decade. Its analysis of Investment Trends retirement income data found that 42 per cent of retirees in 2023 said they stopped full-time work earlier than expected, while 10 per cent retired later than planned.

Employment changes, burn out, redundancy, health and lifestyle issues are among the factors forcing an end to full-time work, and Aware Super head of retirement Jacki Ellis said people retiring earlier “could find themselves in a situation of even more unknowns”.

“Many people can’t see further than approximately 15 years ahead,” she said.

Ms Ellis said many older Australians moved to part-time work, while others assessed that they were more prepared than they thought and could afford to retire early.

Aware Super head of retirement Jacki Ellis

It was important for people to engage as early as possible with their finances and their super fund, which could help with things such as pension eligibility, retirement income streams and lump sum withdrawals, she said.

“Making personal contributions or salary sacrificing, even if it’s a really small amount, can significantly help if there are unexpected costs that need to be dealt with.

“Contacting your fund to seek help and guidance, often at no extra cost, can really help plan for your lifestyle in retirement and ensure that unexpected costs like injuries or changes in health conditions can be accommodated.”

CreationWealth senior financial adviser Andrew Zbik said corporate cultures and management changes were prompting more people in their 60s to retire early.

“A lot of people are burnt out and need a break,” he said.

“We are going through a number of clients right now where the question is ‘can I retire right now instead of working another two years?’

“There’s an element of people thinking ‘what is enough? Why am I in a job I’m not enjoying?’”

People could access their super from age 60 if they met a condition of release such as stopping work, but there was nothing to stop them from changing their mind later and taking on some part-time work, Mr Zbik said.

He said people facing redundancy this year should try to have it happen after July 1, so payments and unused leave would not be added to their current year’s income. “It can push you up another marginal tax rate,” Mr Zbik said.

“A lot of companies are willing to make a redundancy occur on July 1,” he said.

Aware Super’s Ms Ellis said retirement was no longer a moment in time – such as age 65 or the current pension age of 67 – and “the transition takes many forms”.

People who planned well “have a wonderful opportunity to be in control of what their retirement looks like, regardless of how they transition to retirement or what that change in personal circumstances looks like”, she said.

Aware Super has released an interactive retirement guide that features a checklist, answers to key questions, retirement planning activities and real-life stories. “It will help you know what you have, what you need and where to get started,” Ms Ellis said.

Originally published as Early retirement on the cards for millions, and planning is vital