For many Australians, the idea of retiring early has a certain attractiveness. But what if you needed some government support before reaching the Age Pension age? It is highly advisable to remain informed about the options and rules that apply, as well as about the financial implications, if you are planning to stop work before Centrelink’s Age Pension is available to you.
The Age Pension “Age”
The Age Pension age in Australia is on its way up. From 1 July 2023, the qualifying age has officially increased to 67 years for both men and women. One implication of this is that the newly retired below 67 years of age cannot immediately seek Age Pension.
Early Retirement and Its Implications
Once you retire before the age of Age Pension, all your financial sources will continue to depend on yourself until you become eligible. This can be your superannuation, savings, investments, or even a little bit of part-time work. You may face funding gaps for the period before Age Pension becomes availably tendered if you do not plan properly.
Getting Superannuation Before Pension Age
Most Australians can access their superannuation preservation age, which differs from the Age Pension age. According to the date of birth, this can be anything between 55 and 60 years old. If one reaches that age and is retired, they will be eligible to release super as a lump-sum withdrawal or through a periodic income stream.
Once the super is exhausted, one will have to look for other resources until the age of 67.
Other Centrelink Payments Available Before Pension Age
If you obtain early retirement and are still not eligible for the Age Pension, then you will be eligible for other Centrelink payments like:
- JobSeeker Payment: If you are under 67 and seeking work.
- Disability Support Pension (DSP): If you cannot work due to a medical condition or disability.
- Carer Payment: Full-time carer of someone who has a severe illness or severe disability.
Needless to say, these payments are usually subject to income and asset tests.
Planning for the Gap Years
To retire before 67 financially stress-free, planning the gap years is critical. This may include:
- Increasing the super balance and implementing a transition-to-retirement strategy.
- Maintaining some savings or investments outside super to keep things flexible.
- Pursuing part-time or casual work to top up income before the Age Pension payment comes through.
Key Takeaway
It is possible to retire before the Age Pension age, but careful planning should go into it. Without Age Pension sought at 67, dependence on superannuation, savings, or other payments from Centrelink will be needed. A financial advisor can help make sure that your retirement years are pleasant and sustainable.
