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Q&A: When should I retire?

Written and accurate as at: Sep 15, 2022 Current Stats & Facts

I want to ‘set the date’ for my retirement. What things should I be weighing up when deciding when to retire? 

Retirement is a major life change, and ultimately, when and how you choose to retire is a very personal decision. For some, retirement is a long-awaited dream that can’t come soon enough. For others, leaving the structure and social aspects of working life isn’t something to rush. Below are a few things to think about when contemplating your own retirement timeline.

Your plans for retirement

The lifestyle you desire in retirement can have a big influence on the amount of retirement savings you will need to support yourself in your retirement years. In turn, this can have a knock-on effect with regard to when you can realistically retire.

When thinking about your desired lifestyle, things to consider may include where you will live, how many domestic or overseas holidays you wish to take, how often you want to eat out, and how you generally plan to spend your time.

If you have big plans for retirement, such as a sea or tree change, embarking on new travel adventures, or maybe enrolling in a course, your burning ambitions might be a big driver for you to retire sooner. Or, maybe you plan on doing as little as possible in retirement. In which case, there may be less urgency to rush things.

Your financial circumstances

As we’ve mentioned, your overall financial circumstances can be quite influential on when you ultimately retire. Some important things to reflect on include how is your super balance tracking? Do you have any additional savings or investments to support the retirement lifestyle you want? Come retirement, will you be eligible for the Age Pension? Do you own your own home, or will you be paying rent or a mortgage in retirement? Are you planning to downsize your home? 

If your retirement savings and overall financial circumstances look to be falling short of your desired lifestyle, especially if you are nearing your ‘retirement date’, you may feel the need to work longer than previously thought. While this may not be ideal, if appropriate to do so, it can provide you with an opportunity to keep growing your retirement savings, and delay the point at which you need to start drawing down on those savings for income.

On the flip side, you might be in a position to retire early, if that’s what you want to do. Bear in mind that retiring earlier will mean you have more years in retirement, which will also need to be accounted for in terms of the amount of retirement savings needed. It’s also important to note that if you plan to retire prior to meeting a ‘retirement-based’ condition of release for super, or your Age Pension qualifying age, you will need to ensure you have a sufficient level of non-super retirement savings to support you in the meantime.

Whether you are open to working part-time 

Continuing work doesn’t necessarily mean postponing all your retirement plans. Depending on your circumstances, another option might be to ease into retirement more gradually by switching to part-time hours, and, if eligible, accessing income payments from your super to top up your take-home income. This is known as a Transition-to-Retirement strategy.

Through this strategy, you can continue to receive super contributions (from employment). These contributions can help to boost your retirement savings and replace the income payments you’re receiving from your super while you ease into full-time retirement.

Your current state of health

If you’re in good physical health and you believe that working is beneficial for your wellbeing, then it may make sense to not rush retirement. On the other hand, if your health has started to decline, and working life is taking its toll on you, then it may be in your best interests to slow down sooner rather than later.

Letting your health decline too far could mean that you don’t have as much control over when you decide to retire, because your health may dictate this in the end.

At the end of the day, you need to decide what’s best for you. Weighing up each of these factors is important, but remember you can take steps to improve your physical and mental wellbeing whether you’re working or retired.

Your feelings towards work and retirement

Does work provide more than a pay cheque to you? For some, work is just a job, whereas other people find an immense sense of fulfilment in their work. If leaving the workplace represents any kind of loss to you, it might be a good idea to find hobbies or other interests that can provide this fulfilment before you stop working. 

It’s just as important to reflect on your feelings about retirement. Right now, does the thought of retirement evoke positive or negative feelings for you? Ideally, you want to make sure you are emotionally ready to retire before you make the leap. Often, the best way to do this is to talk to your nearest and dearest, make sure you have a strong support network around you, and have a clear plan for how you are going to spend your days.

Deciding when to retire is an important decision, and you need to be fully ready to make the leap. If you have any questions about anything in this article, please get in touch.

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