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If you’re dreaming about swapping the nine-to-five for a more relaxed lifestyle through early retirement, you’re not alone. It turns out one in three Australians under the age of 34 want to retire early, according to Aware Super.
While that research related to early retirement at the age of 55, some people aim to retire even younger than that. There’s a whole movement around it, known as FIRE (Financial Independence, Retire Early).
“The day I could say I can retire if I wish was around 30 years old,” Daniel Walsh, property expert and author of 6 Principles to Retire Younger & Richer tells The Australian Women’s Weekly.
“Being in my early 30s and understanding that I could sit on a beach for the rest of my life and never have a worry about money was fantastic.”
But with the rising cost of living, it can seem like a hard-to-achieve dream. So, we’ve rounded up insights and early retirement tips from the experts.
How early can you retire in Australia?
There is no specific retirement age in Australia. Most people wait until they can access their superannuation at age 60 or when they can get the Age Pension at age 67 but you can retire earlier.
“I don’t think it’s a particular age that you can retire [at but] rather a question of when are you going to get serious about building your wealth for retirement,” Daniel says.
His strategy was focused on investments: he bought his first property when he was 19 and had built a $20 million portfolio by the age of 32.
“The rough rule of thumb is if you put the right plan together, you can [retire] in around 15 years and sometimes even less. If you start early at 20 years old, then by 35 would be the rough age. Or if you were to start later around 40 then 55 would be the age that you could see yourself free from a nine-to-five.”
Put simply, there are lots of strategies you can use to retire early at different ages. The key is to have another source of income you will be able to access before you can get super or the pension.
Is there a different retirement age for women in Australia?
In theory, both men and women can retire at any age if they have the right financial plan. But the age that women retire is affected by different factors to men, including gender pay gaps and time out of the workforce to care for family.
In fact, the government’s Workplace Gender Equality Agency has reported superannuation gender pay gaps of between 19% and 47% at different ages, with the biggest gaps for women over 50. As a result, women’s retirement age could be delayed due to inadequate funds.
Let’s face it, no one wants to work for longer than they have to. So what are the financial decisions that will make your dream of retiring early come true?
4 tips for early retirement
1. Make a retirement plan as soon as possible
Financial experts agree that the best way to achieve early retirement in Australia is to calculate your retirement income well in advance.
“The sooner you begin planning, the better equipped you’ll be to take action and work towards your retirement goal,” says a spokesperson from the Australian Securities and Investments Commission (ASIC).
There are also plenty of resources that can help you plan for early retirement, including:
- The free retirement planner tool on moneysmart.gov.au.
- Service Australia’s free financial information service.
- A licensed financial planner.
Once you’ve worked out how much money you will need once you stop working, and what you expect your living costs will be, you can then figure out how to transition to retirement promptly.
2. Get the most out of your job
When you’re still working, the amount you’re paid can affect both your superannuation and your ability to set up other forms of early retirement income. Unfortunately, more than half of Australian workers (58%) are not happy with their salary, according to a 2023 report from payroll and HR company ADR.
If you’re not satisified with your pay, ask for a raise or seek work that will set you up to reach your ideal retirement income sooner.
“Earn your worth,” says financial advisor Christine Lusher from Lush Wealth. “Earn as much as possible for the hours you work. Get a qualification if it will assist you to earn more long term.”
It’s also important to be objective about requests for a pay rise. Focus on the facts and supporting evidence that shows the value of your work.
“I have had a few young women comment that they know they are being underpaid but they love the people they work with because they treat them like family,” Christine says.
“Let me assure you that your work family may not be around forever. If you are real friends you will stay in touch with them post employment. If your employer does not offer you a competitive salary, seek work elsewhere.”
3. Review your superannuation
For most people, superannuation is the biggest source retirement savings and the second-biggest source of retirement income, after the Age Pension.
But if you retire before the ‘preservation age’ of 60, you won’t be able to access your super straight away (unless it’s under exceptional circumstances). What’s more is that early retirement affects how much super you have available once you can access it.
“I think one financial penalty [to early retirement] would be your super contributions would be lowered if you do retire early due to backing down your active income.”
Your choice of super fund can also make difference when it comes to retiring early.
“So many people just assume that super is either too far away to worry about, or they think the system doesn’t work so they ignore it,” says financial advisor Brenton Tong from Financial Spectrum. “This leads to paying too much in fees and maybe being invested incorrectly – which leads to a poor outcome, making it even harder to retire in the way that you want.”
ASIC also recommends making “extra super contributions if you can afford it”.
“In theory, you should put as much as you can into super, assuming you have a good fund,” Brenton echoes. “The money goes in before tax is taken out and the super fund pays 15 per cent. That means you have an instant uplift in capital from day one, and if that’s invested well, it will perform better than anything you can put your money into with after tax dollars.”
But keep in mind that you won’t be able to access any extra money you put into super if you retire before 60.
4. Start investing while you’re young
The sooner you start investing, the more potential value you can get from your assets. With superannuation, for example, you get compound interest on money you initially deposit, and then you earn interest on the interest. This is why making additional super contributions is an effective way to quickly reach a comfortable retirement income.
But super isn’t the only thing you can invest your money in, as Daniel Walsh proved with his property portfolio.
“I think mentally having the financial freedom and security allowed me to focus on things I like doing on a daily basis for fulfilment rather than for an income,” he says.
It’s also worth keeping in mind that different types of investments have different levels of risk.
“Be mindful of what you’re investing into and chase returns when you’re younger,” Brenton says. “However, investing too cautiously can have the opposite effect and you miss out on great tax effective returns at a time in your life when you can handle the risks.”
Beyond these investments, remember to think about your own home. Most research on how much money you need to retire is based on people owning their own home, without a mortgage.
So, it might help to set up an appointment with an accountant to talk about your market options, and what investments work for you. Just make sure you prioritise paying off your debts first.
There you have it, our top tips on how to retire early. Time to start saving!
*This article takes general advice from ASIC’s Moneysmart, property expert and author Daniel Walsh and financial advisors Christine Lusher from Lush Wealth and Brenton Tong from Financial Spectrum. Make sure you seek financial advice appropriate to your individual circumstances before making decisions.
