Retiring at 60 vs 65: Is There a Difference?

After a lifetime of working, retirement can’t come too soon for some of us. Others enjoy what they do to earn a crust so much they don’t mind working for a few more years.
But even if you love what you do, as your 60th birthday approaches, you’re probably starting to think about stopping. The question is when to retire?
Most Australians see themselves retiring between their 65th and 66th birthdays, according to Australian Bureau of Statistics (ABS) data.
When it actually comes to it however, they jump earlier on average according to the ABS. Their Head of Labour Statistics, Bjorn Jarvis, says that in 2022-2023 ‘people who had retired in the past 20 years said that they did so, on average, at 61.4 years’. He adds that this average has risen from 58.5 years in 2014-15.
This average of 61.4 is actually at odds with recent statements on the ABC from accounting giant KPMG’s urban economist, Terry Rawnsley.
He says the average retirement age in 2022-2023 was 65.5 years (66.2 for men and 64.8 for women).
But you probably know what they say about statistics…
However you slice the figures though, the fact is there’s no defined retirement age in Australia – you can retire from work whenever you want, and for many people their attitude is probably the earlier the better.
If you’re able to, that is.
There are plenty of things that influence this decision, but the top three are money, lifestyle, and health.
What’s the difference between retiring at 60 vs. 65?
The number one decider for a person in good health is generally whether or not they have enough money to maintain – or possibly even make better – the lifestyle they currently have.
No one relishes the thought of having to downgrade their leisure activities – the things you get used to doing for pleasure and leisure in your 40s and 50s are hard to give up in your 60s. But holidays, entertainment, and new toys all cost money, so…
The biggest cash nest egg you’ll most likely have at retirement is your compulsory superannuation. If you retire at 60, you can get your hands on it straight away.
That possibly explains why those ABS figures have an average retirement age of 61.4 years old. Could it be people spending the first couple of years after their 60th looking before they leap?
Of course, the sooner you start planning for retirement, the better. You should actually be thinking about retirement in your 50s if not earlier.
But there’s still time to get yourself organised if you haven’t yet, and perhaps retiring at 65 might be better if it means putting away more money to improve your retirement savings.
Accessing Super at 60 and 65
In Australia, if you were born after 30 June 1964, you can generally access your superannuation at the age of 60. This is the ‘preservation age’, so-called because your super benefits are ‘preserved’ to when you reach that age.
There are, in fact, earlier preservation ages all the way back to 55-years-old, but you need to have been born earlier too.
The website Superguide succinctly describes superannuation benefits as ‘simply the sum of all contributions made by you or your employer over the years, less fees and taxes, plus investment earnings’ (the interest earned by your chosen super fund investing your contributions).
As with everything, however, the picture is slightly more complex because super access at 60 comes with conditions and limitations:
- You must have ceased work with an employer after your 60th birthday, and stated that you are now permanently retired and will not be returning to work, or
- Ceased work with one employer after 60 to gain access to your full superannuation to that point, then taken up a position with a new employer. In this case, your super accruing from that new employment point is preserved.
Until when? Until another preservation release condition is met.
This can be your decision to start a transition to retirement between the ages of 60 and 65. In this way, you may use up to 10 percent of your super each year as a pension, giving you an income stream.
Or it can be simply reaching 65, at which age you have unrestricted access to your super.
Is there an impact of early withdrawals on super?
Sadly, yes. Quite obviously, drawing from your super before the full preservation age of 65 may decrease the total amount available to you on retirement.
If you earn the median salary in Australia of $80,100 a year, you’ll be missing out on approximately $9,212 every year in employer contributions to your super fund (assuming your employer is paying the 11.5 percent super guarantee, which they should be).
That’s over $46,000 more in your pot for staying the course to 65-years-old compared to quitting at 60. It pays to stay if you can, and if you’re willing.
Of course, there may be compelling reasons to stop working at 60 – your own health may be a major factor, or the health of a spouse or other family member who you wish to care for. On the other hand, you might be thinking of things you’d like to do and see while you’re still hale and hearty. Or you may simply be fed up with work and your finances can support quitting.
If you do choose to retire at 60, though, it’s vital to manage your super withdrawals carefully so finding a reputable financial manager to advise you is a must.
Accessing the age pension
If you don’t have enough superannuation to retire, and you have few or no other investments, retiring at 60 might release your super, but your age pension is still years away.
Even at 65 you have another two years to wait for it.
This is because, since 2017, eligibility for the Australian Age Pension has been being gradually increased from 65 to 67 years. And since 1 July 2023, people born from 1 January 1957 onwards can’t access the pension until they reach 67.
The reasoning behind this is that the original ‘retirement age’ of 65 for men (actually the age at which a government age pension was provided) dates back to 1909 when average life expectancy was only 55.
If it sounds unfair to have had a pension age a decade higher than the average age of demise, keep in mind that the ‘average figure’ was skewed massively downward by high child and maternal mortality, infectious diseases, and a whole raft other factors. Things have improved out of sight since then!
Medical advances, and better health and fitness have now lifted average life expectancy to 81 years, so raising the age pension age makes sense.
But if you’re 60 or 65, fancy stopping work, and the Australian Age Pension comes into your calculations for retirement, it’ll be a few more years before it can augment your super pot.
Keep in mind also that the Age Pension when it arrives is subject to income and asset tests.
The income and asset tests for early retirees
Your income can reduce how much age pension you receive. This is determined by an assessment of your, and, if applicable, your partner’s income from all sources. So, if you have financial assets such as your superannuation, savings, and shares, they’re subject to a test called deeming.
There are two deeming rate tiers – 0.25 percent and 2.25 percent – and they apply differently dependent on whether you’re single, or one of a couple, if one of you is receiving a pension, or if neither of you are on the pension.
Deeming can also impact the sale of your principal place of residence should you sell it to downsize to a new home. But the Federal Government rules from 1 January 2023 give you up to two years to purchase a new home before its proceeds are considered assets that will affect your pension rate, so there’s plenty of breathing room there.
At the same, the value of assets such as investments, real estate, personal belongings, and even funeral bonds can be assessed and affect the age pension you receive.
The rules, it seems, are everchanging, and the landscape depends so much on your personal circumstances that it’s good to have a plan and follow it.
Financial planning & savings when retiring at 60 vs 65
Retirement isn’t something most people think about at the start of their working life. Admit it – you probably received your first pay and imagined a new stereo or money towards a car and the independence it would bring. It’s only natural when you’re young, and your whole life is ahead of you.
One of the benefits of compulsory employer contributions to superannuation is it’s something towards retirement a young person starting out doesn’t have to think about.
Right now, your employer has to pop money into your nominated super account at least once a quarter, and from 1 July 2026, employers will have to pay super every payday – a move calculated to reduce unpaid superannuation if a company goes under.
But it’s good to be thinking about retirement as soon as possible – your future self will thank you. If you started in your twenties or thirties, well done you.
If you’re in your 50s, however, and 60 is looming, how much will you need?
Estimating Living Expenses Based on Retirement Age
If a retirement age of 60 is your goal, you’re going to have to make living expense estimates for a longer retirement.
The Association of Superannuation Funds of Australia (ASFA) suggests that a single person needs $43,601 a year for a comfortable retirement, and $61,522 for couples.
Taking just one example of living expenses, probably your biggest and most vital expense is your home, especially if you still have a mortgage.
In 2025, the youngest of the Gen X cohort – those born between 1965 and 1980 – will turn 60. Happy 60th to you! Except…
The July 2024 InfoChoice State of Aussies’ Savings Survey revealed that, on average, only 17 percent of Gen X’ers own their own home mortgage-free. This compares with 49.5 percent of fully home owning Baby Boomers (1946-1964).
It’s a stark difference between the different groups, underscored by a similar variance when it comes to the numbers having a home with a mortgage – only 29.0 percent of Boomers versus 52.9 percent of Gen X.
Even if you’ve paid off your mortgage, your home still requires maintenance which has become more expensive in recent years. Building supplies have increased in price, and trade labour too.
And if your house was built more than 20 years ago, it’s probably showing signs of needing renovation in high wear areas such as the kitchen or bathrooms.
Obviously, if you’re going to know how much your home is costing you in the lead-up to retirement, it’s better having figures in front of you than making vague guesses.
Work out what the regular monthly outgoings are on your home, and also critically evaluate what renovation or special maintenance needs to be done before your intended retirement age.
A spreadsheet is probably the best way to go at it, but even just writing out a list on paper is a good start. This can help determine if you need to hang on until 65!
Another critical evaluation to make is whether or not your home meets your needs now retirement beckons.
A family home may have sentimental value, but does it really serve the needs of a couple of ‘empty nesters’? A large house with a big yard can actually be a bit of an albatross round your neck once the kids have moved on to homes of their own. Do you really want to be mowing the lawn every week during summer?
You might look at the equity you have in your current home and consider using that to make more appropriate arrangements for your lifestyle needs and wants today.
Downsizing to a smaller, easier to manage home has the added benefit of releasing money to invest and boost your retirement nest egg. You might also consider moving to a community such as a retirement village.
Be aware though that traditional retirement villages can be full of hidden financial traps such as entry fees, deferred management fees, and exit fees.
If you’re seeking less costly financial structures with resort-style living, then consider an over-50s land lease community where you own your own home, and there are none of the retirement village fees and restrictions.
Longevity, Inflation, and Managing Withdrawals
As mentioned earlier, we’re living longer than before – to an average of 81.2 years for men, and 85.3 years for women, in fact. If you go for retirement at 65, you’re still looking at potentially spending a quarter of your life out of the workforce. Make it retirement at 60 and obviously it’s longer.
Your plans for retirement need strategies to manage your financial reserves that balance income needs and fund preservation.
They have to take into account your years in retirement and other factors such as inflation.
Even if you feel confident that you can handle your withdrawals yourself, reference to a qualified financial planner is a good idea. They can provide a check to ensure you’re going about things correctly, and also potentially reveal options you might not have previously considered.
What are the pros and cons of retiring at 60 vs 65?
Retiring earlier rather than later might seem attractive, but it’s a double-edged sword.
Pros and Cons of Retiring at 60
Benefits:
- Able to access your superannuation and also work if you wish while transitioning to full retirement.
- More leisure time to finally put your feet up, or get into the hobbies and activities you’ve been putting off or lacking time to do.
- Fulfilling dreams of travel or achieving personal goals
- Enjoying retirement in good health.
Challenges:
- Increased savings are needed to get you through more years without an active income.
- Qualification for the Age Pension is seven years away.
- Potentially increasing healthcare costs as you get older.
- A risk of outlasting your resources by dipping into them sooner.
Pros and Cons of Retiring at 65
Benefits:
- The extra five years of working and having a clear budget brings greater financial security.
- More superannuation has accrued, and accessing it comes with no restrictions.
- The Age Pension is significantly closer than retiring at 60.
Challenges:
- Less time to enjoy retirement.
- Working longer may have potential health impacts, especially if you are working in a physically demanding profession.
- Age-related changes may be becoming more obvious.
Find financial freedom with GemLife over 50s resorts
Whether you’re hoping to retire at 60 or earlier, or maybe working on to 65, ensuring you have your financial ducks in a row is vital.
There’s a lot to understand about the differences between quitting work sooner or later, and also a lot to understand about the different options open to you as you transition to retirement.
GemLife is a land lease community for active over 50s which offers a great resort lifestyle whether you’re still working or are newly retired.
With a simpler and completely transparent financial structure, you’ll be able to make sense – and the most – of your finances at the same time as enjoying great on-site features such as gyms, sport facilities and country clubs.
Even if you’re not ready to hand in your resignation just yet, you’ll be able to enjoy coming home to premium facilities shared with like-minded over-50s in great locations across Australia.
For more information, call our team or request an info pack.