If you’re nearing 60, chances are the thought of retirement has crossed your mind. Many people are unsure about this stage of life, as there is really no one way to experience retirement. Some people might start a new venture, while for others the ideal retirement is travelling or spending time with family.
It’s important to plan financially for what you want to do in your retirement. Part of that planning involves understanding your tax-free superfund.
Is 60 too early to retire?
Bear in mind that financially, 60 may be too early to retire if you intend to use your super age pension account. This is because you’re not eligible to those funds tax-free until you’re 66.
Of course, everyone’s situation is different. You’ll need to plan your retirement accordingly.
How much super do you need to retire at age 60 in Australia?
The first step is to understand your spending habits, and how you intend to spend in future. This will be influenced by whether you want to retire full time or continue with part-time work.
The Association of Superannuation Funds in Australia (ASFA) standard says that, for a comfortable retirement lifestyle, a couple needs $640,000 and an individual, $545,000. For a modest lifestyle it recommends having $70,000.
Can you get an aged pension at 60?
While there is no required age to retire in Australia, people will often plan it out based on when they will be able to get the tax-free age pension. Currently, that’s people aged 66 years to 67 years.
After July 1, 2019 the tax-free age threshold increased from 65 years and 6 months to 66 years for people born from January 1, 1954 to June 30, 1955. If you were born is after that date you’re eligible for an aged pension only when you are 67.
Age Pension and other factors to consider upon retiring
You need to consider a lot of factors when it comes to your life as a free of tax retiree. You’re probably able to live a comfortable life as you envision it now, but a lot of things can change. It is best if you take into account all of the factors:
- Age Pension
- Annual Expenses
- Health costs
- Cost of living (may be affected if you choose to enjoy recreational activities)
- Full retirement or not
When should I access my super funds?
What are super funds?
A super balance (superannuation fund) is compulsory for every single person who has worked and lived in Australia at age 60.
The account balance of this super fund is used to provide an income stream when you retire. A super is typically relied upon as retirement income by people who do not wish to work anymore and who want to be free of tax. Note that you’ll only be eligible to access your super fund when you’re 55.
If you choose to remove money from your super account it will obviously reduce the super remaining for your retirement. It also won’t be tax-free, and you’ll lose out on the interest and investment gains of leaving your super with its provider,
Plan Your Retirement Early
Plan your retirement years before you’re old enough to use your super funds. This will help ensure you have everything you need for the lifestyle you imagine.
It’s a good idea to approach a financial adviser to get sound personal financial advice on your super balance, pension information and any product disclosure statement that goes with it.