Retirement Planning

Can I Retire at 60?

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Retiring at 60 is an appealing goal for many, offering the chance to enjoy life beyond work, pursue passions, and spend quality time with loved ones.

However, deciding whether retirement at 60 is feasible requires careful planning and a realistic look at financial readiness.

With increasing life expectancy and rising living costs, retirees today need to ensure their savings and investments can sustain them for potentially 25-30 years or more.

This article explores essential factors to consider when planning for retirement at 60, from calculating your financial needs to maximising superannuation and creating a sustainable budget.

Whether you’re just starting to plan or are close to your goal, understanding these critical aspects can help you transition smoothly into a secure and fulfilling retirement.

Why is 60 a good age to retire?

While research indicates most people aged 45 in Australia intend to retire at 65 years on average, it’s clear that sometimes life has other plans, because the average age of retirement is a youthful 56 years.

Retiring younger means you’re likely to still be active and able to enjoy travel, hobbies, and family time. On the others side of the coin is determining what income sources are needed to ensure you’re able to live another 25 or so years while meeting rising living costs and healthcare expenses.

At 60 though, Australians can typically access their superannuation tax-free if they are retired.

The preservation age (when most people can access their super) is between 55 and 60, depending on their birth year, but turning 60 allows for tax-free withdrawals, making it a financially advantageous age to retire.

People who retire at 60 therefore often dip into their superannuation and other savings.

 

Happy couple enjoying their day in the outdoor pool

 

How much do I need to retire at 60?

The amount needed to retire at 60 in Australia varies based on lifestyle expectations, health care needs, expenses, and longevity.

For a comfortable retirement, many look to the ASFA Retirement Standard, which estimates that a single person aged 67 needs around $600,000 and a couple needs about $690,000 in superannuation if they own their home.

However, if you plan to travel frequently, enjoy dining out, or have high medical needs, you will need more. Additionally, any outstanding debts, dependents, or expected healthcare expenses play a role.

AFSA’s guidelines are updated quarterly and give a good benchmark for retirement planning:

Retirement LifestyleSingle (Aged 67)Couple (Age 67)
Comfortable$595,000$690,000
Modest$100,000$100,000

*As at 20/11/2024.

Note the fine print: these guidelines assume you own your own home, so for a ‘comfortable’ lifestyle therefore it’s safe to assume your ‘worth’ would need to be in the vicinity of a million dollars, depending of course on the lifestyle you envisage having.

For early retirement at 60, you will likely need to adjust these numbers upward to account for a longer retirement period and potential healthcare costs.

Targets also depend heavily on factors such as inflation, investment returns, and your eligibility for government benefits like the Age Pension, which only becomes available at age 67.

Your retirement location can also affect this number, as living costs vary widely across Australia.

Planning for early retirement means accounting for these variables with a financial buffer, ensuring that your savings and investments can withstand changes in market conditions and your personal needs over time.

Tip: There are many online retirement-needs calculators available to help you work out how much you need to retire with. Combine this with seeing a financial advisor to come up with a comprehensive financial retirement plan.

Can I access my super at 60?

In Australia, the preservation age is the minimum age at which you can access your superannuation (super) if you’ve retired.

It ranges from 55 to 60, depending on your birth year.

For example, those born before July 1, 1960, have a preservation age of 55, while those born after June 30, 1964, have a preservation age of 60.

If you are considering accessing your super, it’s also worthwhile to explore the different options available for withdrawing your funds.

You might choose between taking a lump sum or setting up an income stream, each with its own set of benefits and potential drawbacks.

Here’s how you can generally access your super:

  1. Tax-Free Super Withdrawals:
    • Once you’re 60 or older and meet a condition of release (such as retiring or turning 65), withdrawals from your super, whether as a lump sum or a pension, are entirely tax-free if your super is from a taxed fund (the most common type of fund).
  1. Meeting a Condition of Release:
    • To access your super tax-free, you need to satisfy conditions like retiring after 60, turning 65 (whether retired or not), or beginning a transition-to-retirement (TTR) income stream (subject to some rules).
  1. Income from a Pension:
    • If you convert your super into a retirement income stream (pension), payments are also tax-free after 60 from a taxed fund. This can provide a regular, tax-free income in retirement.
  1. Untaxed Funds:
    • Super held in untaxed funds (common in certain public sector schemes) may still attract some tax, even after 60.

Because super rules aim to ensure the funds are used for retirement to provide long-term financial security, if you access it early without meeting specific conditions there may be significant taxes and penalties.

Special circumstances like severe financial hardship or terminal illness can allow early access.

If you or your spouse are receiving payments from Centrelink, it may affect your Super withdrawals, so check into that first if so.

Changes to super regulations occur periodically, so staying updated is essential.

Lump Sum vs. Income Stream Options

When accessing superannuation, retirees typically choose between lump sum withdrawals and income streams, each offering unique benefits and considerations.

  • Lump sum

Lump sum withdrawals allow you to take out a part or all your super savings as a single payment.

This option provides flexibility, enabling you to pay off significant debts, make large purchases, or invest in other assets.

However, managing a lump sum requires careful planning to ensure it lasts throughout retirement, as there is no ongoing income provided once the funds are depleted.

  • Income streams

Income streams, on the other hand, provide a steady, regular payment from your super balance.

This can be structured as an account-based pension or an annuity, offering a predictable income flow to cover living expenses.

Income streams often include tax advantages, particularly for retirees aged 60 or older, and help ensure your savings are spread over your retirement years.

However, they may limit immediate access to large amounts of your super.

Choosing between a lump sum and an income stream—or combining both—depends on your financial needs, lifestyle goals, and retirement plans.

Seeking financial advice can help tailor a strategy that balances immediate access to funds with long-term financial security.

  • Tax considerations

Tax implications and the impact on Age Pension eligibility are important factors to consider when accessing superannuation through lump sum withdrawals or income streams.

Some considerations:

  1. Over age 60: Withdrawals from a taxed super fund are generally tax-free, whether taken as a lump sum or an income stream.
  2. Under age 60: Super withdrawals may be subject to tax depending on whether they come from the taxable or tax-free components of your super balance. Lump sums and income streams are taxed at different rates, with income streams generally receiving concessional treatment.
  3. Exceeding transfer balance cap: If you commence an income stream and exceed the balance transfer cap (which is $1.9 million in the 2024–25 finance year), additional funds must remain in an accumulation account, where earnings are taxed at 15 percent or up to 30 percent if you’ve gone over the cap before.
  • Impact on age pension eligibility

Superannuation is assessed under both the assets test and income test for Age Pension eligibility once you reach pension age:

  • Lump Sum Withdrawals: Any funds you withdraw and retain (e.g., in a bank account or invested) count as assessable assets and may reduce your pension entitlements.
  • Income Streams: Payments are assessed as income, and the account balance is included in the assets test. How this affects the Age Pension depends on the amount of your income stream and the remaining super balance.

Proper planning can minimise tax liabilities and optimise Age Pension entitlements.

It’s best to consult with a financial adviser to help create a strategy tailored to your circumstances.

Senior man working from home.

 

Can I access the age pension at 60?

No, the Age Pension is not accessible at 60. The minimum eligibility age is currently 67.

Superannuation, however, can be accessed at 60, provided you meet certain retirement conditions.

Even if you retire at 60 and access your superannuation, you won’t qualify for the Age Pension until the government-set age.

Additionally, when you do reach pension age, both income and asset tests will determine your pension eligibility, which could be impacted by any superannuation withdrawals or ongoing income streams.

The Income/Asset test

For Age Pension eligibility in Australia, both income and asset tests are used to assess your entitlement. [[link to: ]]

The Income Test looks at earnings from various sources, including employment, investments, and certain income streams.

If your income exceeds a set threshold, your pension payments may reduce or cease.

The Assets Test assesses the value of property, vehicles, savings, investments, and superannuation (for those over pension age).

Your principal home is generally exempt, but other assets count toward the limit. Exceeding asset thresholds can also reduce your pension payments.

For updated thresholds, see Services Australia’s guide.

If retiring before 67 in Australia, alternatives to the Age Pension include drawing from your superannuation if you’ve reached your preservation age and met a condition of release, or starting a Transition to Retirement (TTR) income stream while still working part-time.

Other options include personal savings, investments, or income from assets like rental properties.

Government benefits like JobSeeker may be available in limited circumstances if you’re not working and meet eligibility criteria.

Planning with a financial adviser can help bridge the gap until Age Pension eligibility.

Balancing house and money

 

What are the financial requirements of retiring at 60?

Retiring at 60 in Australia requires careful financial planning to ensure that savings and superannuation last throughout retirement.

Having a diversified portfolio of super, investments, and savings can also help.

Additionally, creating a strategy for accessing super, planning for inflation, and budgeting for future needs such as healthcare and travel/lifestyle are essential.

Here are important components to achieve financial retirement by the age of 60:

Superannuation

Super is a powerful tool for retirement savings.

By contributing extra (voluntary contributions) and managing your super investments wisely, you can grow your balance significantly.

This becomes tax-effective due to the lower tax rate on super contributions and earnings within the fund.

Diversified investments

Investing outside of super can provide both growth and income, especially in assets like stocks, property, or managed funds.

Diversification helps to spread risk, and having a mix of assets can protect against market volatility while allowing for growth in different economic conditions.

 

Savings and cash reserves

Liquid savings (cash) provide a buffer for unexpected expenses and allow you to avoid dipping into investments prematurely.

A reserve in cash or short-term deposits is valuable for covering immediate expenses, while reducing the need to sell assets during downturns.

 Planning for inflation

Inflation erodes purchasing power over time, which is especially important when considering a retirement that could last 20-30 years.

Investing in assets that generally outpace inflation (e.g., equities, property) and adjusting retirement income plans accordingly can help maintain your standard of living.

Retirement planning

Tailoring your retirement plan with realistic income expectations, tax considerations, and government benefits like the Age Pension (which may come into play after 67) can ensure your portfolio aligns with your long-term needs.

In summary, diversification and proactive planning allow your finances to grow while also helping you weather potential economic fluctuations.

For specific advice, consulting with a financial planner or retirement specialist is wise, as they can provide personalised strategies that suit your retirement goals and lifestyle.

 

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Retiring at 60 is a realistic and rewarding goal, but it requires careful planning, diversified investments, and strategies to protect against inflation.

By setting up a well-rounded financial plan early, you can create a retirement lifestyle that’s secure and enjoyable.

For those looking to enhance their retirement journey, GemLife offers a financially savvy choice, providing a high-quality lifestyle with a focus on low maintenance living and first-class amenities that cater to an active, social retirement.

Whether you’re transitioning into retirement or fully embracing it, living at GemLife can help you make the most of your financial resources and enjoy a fulfilling next chapter.

Contact GemLife today for more information or to request an information pack.