Retirement often feels like something in the distant future. We’re living and working longer than ever before, so it’s easy to assume you have plenty of time to prepare. But here’s an alarming statistic that might change your perspective: Aware Super’s 2005 Retirement Study found that one in six Australians who retired in the previous two years were forced to stop working earlier than they had planned.

Life has a habit of throwing curveballs. The three most common reasons people retire early are health-related issues, with 31 per cent of those who retired in the past two years citing workplace stress as a key factor. Redundancy is another major cause, affecting 5 per cent of all Australian retirees.

Finally, there’s the increasing need to care for a loved one, which is becoming more common with the ‘sandwich generation’ juggling both children and ageing parents.

So what can you do if you suddenly have to retire earlier than planned?

Start with the basics

The first step is to contact your super fund and explain your situation. Check your current balance and confirm whether you have any insurances that you may be eligible to claim. Most funds provide total and permanent disability (TPD) insurance by default and income protection insurance as an option. Income protection insurance can give you a percentage of your salary for a period if you can’t work due to illness or injury and you might be able to claim a lump sum on your TPD policy if it’s so serious you can’t go back to work. Sometimes people don’t realise they can make a claim, and it can make a significant difference to their financial position.

Understand your retirement needs

A rule of thumb is that most people will need around 70 per cent of their current take-home pay to maintain their lifestyle in retirement. However, there’s no single magic number – everyone’s retirement looks different depending on their lifestyle goals and financial circumstances.

It’s important to remember there are different lifestyle phases in retirement, and you won’t necessarily need the same amount of money throughout. Additionally, most Australians will receive some level of government age pension support, which for a typical retiree makes up about two-thirds of their total retirement income.  

Don’t leave money on the table

There’s approximately $17 billion dollars in lost and unclaimed superannuation across Australia. Check whether any of that belongs to you by accessing my.gov.au or contacting the Australian Taxation Office. You should also speak to Centrelink to determine if there are any government entitlements you may be eligible to receive.

Consolidate your super accounts

Around four million Australians have more than one superannuation account.  While it may seem harmless to have multiple accounts, this could mean you’re paying duplicate fees and possibly duplicate insurance premiums. Consolidating your super could increase your retirement balance by approximately $3000 for each additional account you combine.

But what if you’re still in work and worried about the prospect of early retirement? Here are some tips.

Use online planning tools and get advice

Take advantage of online retirement planning tools like Aware Super’s My Retirement Planner to test different scenarios. You don’t have to be a member of Aware Super to access this tool. Consider what would happen if you retired next year, worked longer than expected, or needed to take time off to care for someone. These tools can provide a step-by-step action plan to help you move forward. Most super funds can also provide financial advice about your super account at no additional cost.

Consider making additional super contributions

If your financial circumstances allow, additional contributions could be an effective way to boost your superannuation balance in your pre-retirement years and reduce the financial impact of a possible early retirement. This option may be suitable for those who haven’t had the cash flow in the past to make voluntary contributions, often because they were paying off a mortgage. When deciding whether to add to your super, keep in mind that contribution eligibility criteria and caps apply.

For example, a typical member could increase their retirement balance by up to $189,000 if they maximised their concessional contribution cap for their last 10 years before retirement, while also saving up to $30,000 in taxes over this period. Even making smaller voluntary contributions regularly could make a meaningful difference over time.

Remember, whether your possible retirement looms in six months or six years, it’s never too late to improve your position.

Issued by Aware Super Pty Ltd (ABN 11 118 202 672, AFSL 293340) trustee of Aware Super (ABN 53 226 460 365).

General advice only. Consider your objectives, financial situation or needs, which have not been accounted for in this information and read the relevant PDS and TMD before deciding to acquire, or continue to hold, any financial product.