If you’re thinking about becoming financially independent and retiring early – AKA FIRE – you may be curious as to whether you can rely on your super to help fund your retirement. The short answer is: possibly. The long answer is much more complex and involves several limitations.

When can I access my super?

You’re generally only able to access your super when you reach preservation age . Depending on the year you were born, this age can range from 55 to 60 years old.

Once you reach preservation age, you also need to stop working completely or start the transition to retirement (TTR) process to withdraw your super . Alternatively, you can wait till you hit 65 to access all of your super – regardless of whether you’re working or fully retired.

The government’s Age Pension kicks in a little later at the age of 67. This is a regular payment outside your super that provides you with a basic income once you retire.

The reason you need to wait is that superannuation is purely designed to help fund your retirement. By finishing your working life with a healthy super balance, you’ll be more likely to enjoy a comfortable retirement, and you’ll be less reliant on the government’s pension scheme.

If you want to get hold of your super earlier than preservation age, you’ll need to meet strict criteria set by the Australian Taxation Office (ATO) – which we’ll get to shortly. These criteria are centred on extenuating circumstances where there’s effectively a financial necessity that requires you to retrieve your super early.

Under what circumstances can I access my super early?

There are a few scenarios where you may be granted early access to your super .

Each typically requires you to apply to the ATO and/or your super fund, with a lot of documentation to support your claim. The process can be incredibly complicated and has strict conditions, plus there may be different tax rules that apply to certain types of withdrawal.

• Compassionate grounds. You may need your super to pay for things like medical treatment; home modifications to accommodate a severe disability; funeral expenses; or to stop foreclosure or the forced sale of your home.
• Terminal medical condition. Super is paid as a lump sum if you’re suffering from a terminal illness or injury.
• Financial hardship. Your super fund may grant access to some of your super if you can prove you’re experiencing severe financial hardship.
• Temporary incapacity. If you’re temporarily unable to work, you might be able to withdraw your super as an income stream – although this is generally connected to the insurance benefits within your super.
• Permanent incapacity. If you can’t work in your field or you have to undertake other work due to a permanent physical or mental condition, you might be able to access some of your super.
• Low super balance. You may be able to withdraw your super if there’s less than $200 in your balance.
• First Home Super Saver Scheme (FHSSS). The FHSSS allows you to make voluntary contributions to your super to help fund the purchase of your first home. Know that there are limitations on how much you can contribute and withdraw, plus there are conditions you must meet to take money out of your super.

If any of these life events happen to you, chat to your super fund directly to see what your options are. You might also want to reach out to your accountant to find out the tax implications of early withdrawal.

If not through my super, how can I fund early retirement?

By now you’re probably wondering how to keep yourself afloat after you retire early .

In short, you’ll need to figure out your own source of retirement income until you can access your super.

Here are a few options.

Savings

FIRE is all about aggressive saving, sometimes setting aside up to 70% of your income towards your retirement nest egg.

As part of your savings strategy, you could open a savings account with a suitable interest rate and minimal or no account fees. The advantage of a traditional savings account is that it allows you to accrue interest over a lengthy period. It’s also flexible, meaning you can use your money whenever you want (although there may be interest penalties).

Investing

As far as investing goes, the goal for FIRE advocates is to accumulate enough net worth that they can comfortably stop working. They then live off small withdrawals and/or passive income from their investments.

There are several ways to invest your money ahead of (and during) early retirement. You could put your money in shares , but you could also consider other types of investments like property or bonds.

Passive income could be via rental income earned from investment properties; dividends from shares; or interest on savings.

Like your savings, you can use any money earned from your investments whenever you want – giving you financial flexibility well before you hit preservation age.

Other work

Even if you retire early, you don’t have to stop working entirely. Many FIRE champions choose to continue taking on paid employment, but the emphasis is on doing work they choose to do rather than work they have to do to sustain their livelihoods.

Examples include switching to part-time hours, freelancing, consulting, participating in the gig economy, or even receiving income from hobbies.

Don’t forget about your super

Remember that you’ll be able to access your super eventually, so it’s still worth keeping a close eye on it to maximise your balance.

In the interim period between now and preservation age, you could consider making voluntary contributions to help boost your nest egg. These contributions could be made before retiring, or even once you’ve reached FIRE and are waiting to retrieve your super.

We hope this resource has been helpful. Best of luck in your quest towards a comfortable retirement!