If you’re on the path to financial independence and retiring early (FIRE), you’re probably planning each step to get there. A key step is figuring out at what age you can realistically retire. And if superannuation is part of your strategy towards FIRE, you may be asking: “When can I access my super”. As you’ve researched the topic, you might’ve come across the terms ‘super preservation age’ and ‘retirement age’.
Aren’t they the same thing? Well, yes and no.
In the complexities of Australia’s superannuation system, not every person can access their super at the same age. It depends on a few factors such as when you were born, your employment status and life circumstances. For more on the rules for accessing your super, read our article on super withdrawal.
In this article, we focus on the difference between super preservation age and retirement age and how it might impact your retirement strategy.
Difference between super preservation age and retirement age
We know that not everyone retires at the same age. Some retire early, while others retire later than expected. Life happens and we roll with the punches.
However, in Australia, there is a legislated retirement age. That is when you qualify to receive the Government Age Pension (more about that in our article on the retirement age in Australia). If you’re reading this, there's a likely chance you were born after 1 January 1957. If so, your qualifying age for the Age Pension (also known as ‘retirement age’) is 67. If that isn’t you, then a slightly younger retirement age applies. The table below sets out this information:
Now, if you’re aiming to retire before age 67, you’re probably more interested in the super preservation age. Generally, you can withdraw your super from age 65. But if FIRE is your goal, it’s likely that’s still not early enough.
That’s when the super preservation age comes in.
The super preservation age allows you to access your super sooner than age 65. When you reach preservation age, you can withdraw your super as long as you retire or semi-retire. Like the retirement age, the super preservation age that applies is based on your date of birth. A summary of the different preservation ages is set out in the below table:
Now that we’re clear on the difference between super preservation age and retirement age, let’s consider what that means for your financial goals.
Super preservation age and your FIRE strategy
I mentioned before that if FIRE is your goal, you’ll find the super preservation age more relevant to your situation.
As we’ve explained in our article on Financial Independence, Retire Early, FIRE looks different for each person. The path to and the reality of achieving financial freedom is specific to the individual. That’s why there are seven different types of FIRE:
- TraditionalFIRE
- LeanFIRE
- FatFIRE
- SemiFIRE
- BaristaFIRE
- GeoFIRE
- NomadFIRE
For more information, read our article on different FIRE types.
So, where does the super preservation age come in for your FIRE strategy?
Let’s consider a TraditionalFIRE strategy. Most people on the road to achieving FIRE follow this approach. They want to retire from traditional work early and build up enough wealth and passive income to support their lifestyle. If you’re working toward TraditionalFIRE, you might decide to retire at age 45. When you reach preservation age (60), you decide to withdraw your super as a cash injection to cover living expenses. The plan is that, together with your accumulated wealth and passive income, you’ll be set for the rest of retirement.
Or maybe your goal is SemiFIRE (to continue part-time professional work) or BaristaFIRE (a part-time or casual low-stress job). You decide to semi-retire at age 45, still working but at significantly reduced hours. At age 60, because of your semi-retirement status, you can access your super as a transition to retirement income stream. You receive these regular payments alongside your passive income to meet expenses.
Your options at super preservation age
The above examples illustrate withdrawing your super as either a lump sum or income stream at your super preservation age. However, once you fully retire, you can also choose to do both. As mentioned in our down-to-earth guide to super withdrawal, you have three options:
- Income stream (regular payments over time)
- Lump sum (one off payment in full)
- Combination of both
The option that works best for you will depend on your FIRE strategy and personal circumstances. No matter what role your super plays in achieving FIRE, it will require saving, budgeting and investing in income generating assets. Your super can give that extra boost to your passive income during retirement.
By understanding super you can make it work for you to live your desired retirement lifestyle.
