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How Do You Know When To Retire? 8 Signs It Might Be Time
How Do You Know When To Retire
Written by Chris Strano |
Updated on October 17, 2024

Fact checked by our licensed advisers

How do you know when to retire? It’s a question that’s both exciting and challenging. While financial readiness is a major factor, it’s far from the only consideration.

In this article we will cover eight key indicators that can help you decide when is the right time to retire. Also, towards the end of the article, I’ll reveal an increasingly popular alternative to traditional retirement that more Australians are embracing.

If you’d rather watch than read, this video also covers the topic:

How Do You Know When It’s Time to Retire?

There are a variety of signs that will indicate to you that it’s time to retire.

Understanding the reasons behind why you are considering retirement will not only give you peace of mind that you are retiring for the right reasons, but will also factor largely into the retirement approach you should take.

Here’s 8 considerations for you to consider.

1. Have You Reached Retirement Age?

You are able to retire at any age in Australia. There is no law that requires you to work until a certain age.

However, there are rules around the age you can access your superannuation and when you become eligible for Centrelink Age Pension payments.

As affordability will play a major part in your ability to retire, the first retirement consideration in knowing when you can retire should be the retirement ages that are relevant to you.

The 4 notable ages when it comes to retirement include:

1. Preservation Age – This is the first time that you will have at least some access to your superannuation, regardless of whether you are working, or not.

2. Age 60 – If you have an employment arrangement come to an end after attaining age 60, you can generally have full access to the super you have accumulated up until that date, even if you start work in a new role.

3. Age 65 – Once you reach age 65, there is no restriction on accessing your super. You have full access to your super from this age, even if you are still working

4. Age 67 – Age 67 is when you first become eligible for Age Pension payments, provided you satisfy the Assets Test and Income Test, together with other criteria. As you can see, there are a number of ages relating to retirement.

Once you know when you can access your super and Age Pension entitlements, the next consideration of knowing when to retire is to determine when you can afford to retire.

2. Can You Afford To Retire?

The most important consideration in knowing when you can retire is understanding when you can afford to retire.

Thankfully, retirement affordability is completely up to you. What I mean by this is that your desired retirement income will dictate when you can afford to retire. It’s quite simple: A lower retirement income will require less capital, allowing you to retire sooner; and vice versa.

Figuring out your target retirement income and then reverse-engineering the investment and super balance required to achieve that income will give you a good idea of when you can afford to retire. Use this retirement calculator to help.

Now, you might be able to afford to retire, but how do you know if the time is right?

Related article: How Much Super Do I Need To Retire

3. Have Your Priorities Changed?

There may come a point when you realise there’s more to life than work. It might be time to explore that big old world out there that you’ve never seen, or indulge in hobbies you’ve never had time for, or cherish more time with your loved ones now that you can afford to do so.

Whatever your reason, a shift in priorities could be a sign that now is a good time to retire. A shift in priorities may also be coinciding with an unfulfilling job.

4. Do You Lack Fulfillment in Your Work?

Many of us seek fulfillment in our jobs. That fulfillment might simply come from being relied upon by others, or it could be a function of doing meaningful work as a service to your community, other people or the world at large.

But, in this ever-changing world of red-tape and bureaucracy, even the most gratifying roles can lose their charm and fulfillment can slowly dissipate.

Finding motivation when there’s lack of fulfillment can be difficult and this could mean it’s time to think about retirement.

Even if lack of fulfillment or a change in priorities isn’t an issue, a desire to retire might instead stem from being burnt out.

5. Are You Feeling Burnt Out?

For 30 years you’ve given a very large part of your life to your work. There comes a point where that can be tiring. You get to a stage where you feel like you could sleep for a month, or holiday for a year.

Is it time to switch a work-related income stream for a retirement income stream? Or perhaps consider a transition to retirement pension to reduce your work hours—a topic I’ll explore in more detail later.

While feeling burnt out might mean retiring sooner and settling for a lower retirement income, it could well be your best option.

What level of retirement income are you willing to sacrifice to get out of the rat-race and retire early?

Lack of fulfillment and feeling burnt out can also quickly lead to health issues.

6. Is Your Health Declining?

The number one priority in all of our lives is health. Without it we don’t get very far. As we get older we become more susceptible to health issues and our bodies generally take longer to bounce back. There comes a time when we need to prioritise our health above all else.

No one knows your health better than yourself and based on that, only you will know when it’s time to retire for health reasons.

Maybe health, a lack of passion for work or feeling burnt out isn’t even an issue for you.

Maybe you’re just really, really pumped about all the things you want to do in retirement!

7. Are You Excited About Retirement?

I’m not sure about you but, personally, I don’t think it would be too difficult to fill up a week in retirement. All those things that you’ve wanted to do but have never had time for can now become a reality once you are retired.

Not only will you have access to superannuation to fund the expenses, but you’ll also have time to do them, without needing to wait until the weekend, or being too exhausted to do so.

Being excited for retirement might be the perfect time to retire.

Just be sure that you’re emotionally prepared for it.

8. Are You Emotionally Prepared for Retirement?

It might seem hard to believe, but being emotionally prepared for retirement is extremely important.

It’s not uncommon for people to retire and feel lost – only to return to the comfort of work. After 30-odd years, work inevitably becomes a large part of your identity.

The people you work with also become a large part of your life. As excited as you might be about retirement, just make sure you’re ready for it.

Speak to others who have retired and learn about their experiences, including any part of the transition they found difficult.

Now If you’re still unsure about when to fully retire or you just aren’t ready to commit to leaving the workforce entirely, there is an alternative that many Australians are adopting.

An Alternative Approach to Traditional Retirement

One increasingly popular alternative to traditional retirement is transitioning into retirement.

Transitioning into retirement involves gradually moving from full-time employment to part-time work over a period of years before fully retiring.

This approach allows individuals to access part of their superannuation while still working, provided they have reached their superannuation preservation age.

There are a number of benefits to this plus incentives for doing so, including:

  • Ease into retirement – Getting comfortable with retirement life without diving in head-first can help you adjust gradually.
  • Financial security – Maintaining financial security through a part-time wage allows you to continue earning while reducing your workload.
  • Supplementary income – A transition to retirement pension can supplement your income, easing the financial impact of reduced work hours.
  • Workforce flexibility – Staying connected to the workforce gives you the option to return to full-time work if you wish.
  • Tax efficiency – You may enjoy a higher pro-rata after-tax income due to having a lower average tax rate.

Transitioning into retirement offers a flexible and gradual shift from full-time work, allowing you to maintain financial stability and adjust to retirement life at your own pace.

With the added benefits of part-time income and superannuation access, it’s an appealing option for those not ready to fully retire.

Retirement is one of life’s most significant decisions, and understanding the right time to take that step requires thoughtful consideration of various factors, both financial and personal.

Whether it’s assessing your financial readiness, reflecting on your personal goals, or exploring alternatives like transitioning into retirement, having a clear plan is vital.

To ensure you’re in the best position possible to retire on your terms, it’s important to consider advice from a specialist retirement planning financial adviser.

Toro Wealth specialises solely in retirement planning advice. Our aim is to give you confidence around when you can retire, the retirement income you can achieve and how to optimise your financial position in the lead-up to retirement. If you’re interested in learning more about our service and cost, click here.

Chris Strano

Chris is a financial planning professional with over 15 years of experience, helping pre and post-retirees achieve their financial goals. He is also the founder and managing partner at Toro Wealth and SuperGuy.com.au.

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