According to recent data from the Australian Bureau of Statistics (ABS), there is often a discrepancy between the age many Australians plan to retire and the age they actually do. While the average planned retirement age is 65.5 years, the average actual retirement age is significantly earlier at 56.3 years.

Currently, most retirees rely primarily on pensions for their income. However, the 2023 Intergenerational Report (IGR) suggests that superannuation may become the dominant source of retirement income in the future.

As a result, it is becoming increasingly crucial for individuals to build up sufficient superannuation savings for their retirement.

What does a young retirement age mean for super?

Currently, women are retiring at an older age compared to previous years. However, the Australian Bureau of Statistics (ABS) reports that in 2020/21, there were 500,000 more women over the age of 45 who had retired compared to men in the same age group.

The data also reveals that 1 in 3 women rely on a partner’s income to cover their living expenses in retirement, whereas this is true for only 7% of men. This suggests that retiring earlier could potentially reduce the amount of superannuation available later on.

To achieve financial comfort in retirement, the Australian Financial Security Authority (AFSA) recommends that couples aim to have $690,000 and singles $595,000 in their superannuation fund by the time they retire. For a more modest retirement, a super balance of $100,000 is suggested for both couples and singles receiving the Age Pension.

Despite these recommendations, the decision to retire is sometimes unavoidable. There are various reasons why Australians may retire early, even if they are not yet able to access their superannuation. Let’s explore some of these reasons.

Why are some Aussies retiring before the preservation age?

According to the ABS, here are the main reasons retirees stopped working in 2020-21:

• 13% of retirees cited a health condition, such as a disability, sickness, or injury, as the reason for stopping work.
• 7% of Australians retired early due to job availability issues, being dismissed, or retrenched.

However, retiring before reaching the preservation age doesn’t necessarily mean having an insufficient amount of superannuation later on. By being proactive with your super fund, you can potentially grow your balance and have more disposable income in retirement.

Review your super strategy before retirement

When considering ways to grow your super balance, here are a couple of factors to keep in mind:

1. Super Fund Investment Type: The returns on your investments can vary based on your risk tolerance. By adjusting your super investments, you can choose what might be best for you. For example, selecting a high-growth investment type could yield higher returns, but it also comes with greater risk.
2. Long-term Performance of Your Super Fund: While some super funds may have a bad year in terms of returns, consistently poor performance over several years might prompt you to consider switching providers.

Having a clear idea of your retirement savings goals is essential for being well-prepared. It might also be beneficial to seek professional advice to develop a tailored plan that meets your specific needs.

To learn more about superannuation and start planning for your future, visit our superannuation guides hub.