Retirement is a significant milestone, but there’s no universal answer to the question: “When is the best time to retire?” Planning for a longer retirement than expected is crucial, and here’s why.
Thanks to advancements in healthcare and living conditions, people are living longer lives than ever before. According to the Australian Government Actuary (AGA), people who are currently 65 years old can expect to live at least until the age of 87 for men and 89 for women, factoring in life expectancy improvements over the past 25 years. This longer life expectancy should be an essential consideration when thinking about retirement.
Another factor to consider is how long you’ll actually spend in retirement. For instance, recent retirees in Australia tend to retire around the age of 63, according to the Australian Bureau of Statistics. That means many people will spend at least 25 years in retirement, and for some, it could be much longer. This makes financial planning for retirement even more important.
Retirement Planning: What You Need to Think About
It’s essential to begin planning your retirement as early as possible. Knowing when you plan to leave the workforce will influence how much you need to save. While some people retire at 60 or 65, others work well into their 70s. Retirement doesn’t have a one-size-fits-all age—it depends on personal goals, financial circumstances, and health.
National Seniors’ CEO, Professor John McCallum, notes that the decision to retire often happens when people reach a point where they want to focus on things they’ve delayed, such as spending more time with family or pursuing hobbies. For others, retirement might happen due to health reasons, or because they feel it’s time to move on from their careers.
For Marney Perna, who is planning her retirement, the decision to retire is linked to her health. She wants to enjoy her retirement while she’s still physically capable, rather than working into her 70s and possibly being unable to fully enjoy her time away from work. “I want to ensure I’m fit and healthy,” she says. “I don’t want to be in a position where I can’t enjoy my retirement because my health deteriorates unexpectedly.”
Start Planning Early
The earlier you begin planning for retirement, the better. This planning isn’t just about the financial aspect; it’s also about envisioning what your retirement will look like. It’s essential to understand how much money you’ll need for the lifestyle you hope to live.
As Marney Perna highlights, she and her husband began saving for retirement in their 20s. They’ve always made sure their financial future was secure, without relying on the Age Pension. “If we wanted to buy a car, we ensured we could. But we always kept our financial future in mind,” she says.
Kaylee Garden, a financial planner, points out that many people don’t get to choose when they retire. Health issues, job losses, or other unforeseen circumstances often play a major role in this decision. A 2019 survey found that 50% of Australians cited work availability or health reasons as factors influencing their retirement age.
Many individuals find themselves retiring earlier than planned, without the necessary funds to live the retirement they had envisioned. However, Garden emphasizes that with proper planning, it’s possible to retire with confidence and enjoy a comfortable lifestyle.
Creating a Solid Retirement Plan
The first step in building a solid retirement plan is to create a budget. Understanding how much money you’ll need each year for living expenses is essential, and don’t forget to account for one-time expenses like a vacation, home renovations, or large purchases.
According to the Association of Superannuation Funds of Australia’s Retirement Standard, a comfortable retirement requires $595,000 for singles and $690,000 for couples. This should be factored into your planning, along with additional savings for emergencies or lifestyle enhancements.
Securing Your Income in Retirement
Having a steady and predictable income stream during retirement is a priority for many. One solution to consider is purchasing a lifetime annuity. Annuities provide regular payments for life, helping to reduce the uncertainty that can come with market fluctuations. National Seniors Australia’s recent report shows that retirees with secure, predictable income streams report higher financial comfort than those who rely on market-linked savings.
John McCallum stresses that annuities can play a key role in securing a comfortable retirement, particularly for those without defined benefit pensions or significant wealth. “Annuities give you an additional layer of protection for life, or for a set investment term,” he says. “They can help you increase your Age Pension entitlements and offer peace of mind as they provide regular income to cover essential expenses during retirement.”
As more baby boomers enter retirement, annuities are expected to play an even more crucial role in maintaining financial security and supporting retirees’ lifestyles. McCallum adds, “The government only provides the basics, and annuities can help supplement that, ensuring a higher quality of life in retirement.”
Conclusion
While there’s no perfect retirement age, the key is planning ahead. Understanding how long your retirement might last, how much you’ll need, and how to generate reliable income can make a huge difference in your ability to enjoy life after work. Start planning today to ensure that your retirement is both financially secure and fulfilling.
