What do you need to know as you approach 60?

As with any other road, on the road to retirement some crossroads are tougher than others. That’s certainly the case when you approach 60. In this article, the third in the Road to Retirement series, we explore why now is the time to get active.

But first, some context. What is the ‘typical’ financial scenario for those currently aged 50 to 60?

Gen X is hitting retirement

If you are part of the 50-60 year old demographic, that makes you a Gen Xer, born between 1965 and 1980. There are 1.5 million Australians in this cohort, with the oldest now turning 60 and forming the ‘leading edge’ of Gen X retirees. What will retirement look like for you? It’s doubtful you and your cohort will choose to manage your own transition by quietly following what baby boomers have done. Your generation is different, after all. Rather than the Beatles and the Stones, your musical memories are more likely to be Guns n Roses, Wham, Madonna or even Ricki Astley! Live Aid concerts were a big deal when you were young and Hey Hey, It’s Saturday or Neighbours offered fun home-grown entertainment.

The role of mandatory super

Compulsory super started in 1992, so from your earliest working years you will have benefitted from this life-changing legislation. Males aged 55-59 now have median super balances of nearly $200,000 ($191,263) with females holding lower amounts of $130,714.

(ASFA 2023 An update on superannuation account balances.)

If you are a couple, here’s what your future might look like. It’s possible to project a combined (couple) amount ($321,977) across seven years, including your compulsory super contributions, which means an increase to $538,000 plus by the time you reach Age Pension age of 67. It represents a significant potential nest egg and a sign of Australia’s superannuation system reaching maturity.
Why not put your own current super balance into this calculator to see your likely retirement savings?

Honour your health and wellbeing by making it your first priority. Photo: Getty

Life is busy, but health and wellbeing comes first

Turning 60 means reaching a major decision-making age, so what do you need to know and why should you care? Let’s begin with where you are right now. It’s likely that you are still working, you may be trying to parent feisty adolescents or pay down debt. Or you could be attempting to buy a first home or pursue a new career direction. It is possible that you feel overwhelmed, exhausted or even financially trapped. Seeking help for particular circumstances or needs is always smart, even if it’s just asking a friend to listen while you download. Your health is your number one asset at this busy time of life, as it will be any time in the future. As noted in our previous article, honour your health and wellbeing by making it your first priority.

Reaching Preservation Age

Now let’s consider the three broad financial choices that you have when your turn 60. In Part Two (Will your money last?) we covered the five different sources of retirement funding.  Apart from your family home, your largest asset is probably your super. At age 60, you will reach Preservation Age. This means you can now access your super savings in one of three different ways:

• By retiring and starting to pay yourself a retirement income from an Account-Based Pension (ABP)

• By using a Transition-to-Retirement (TTR) strategy whereby you access some of your super but continue to work and contribute

• By withdrawing a lump sum to pay for specific needs such as debt reduction, health needs, home renovations or a new car.

Keeping on

The other, fourth, option which many 60 year olds will choose, is to maintain the status quo – to keep working, contributing to super, paying off the mortgage and planning for retirement in a few years’ time. That is probably the most common response at age 60, assuming your health is good and your employment is secure. But even though you plan to keep on keeping on while you can, it makes sense to chat to a planner about your longer term needs. There are four key considerations it now helps to understand:

• your eventual Age Pension eligibility,

• your current super investment settings (are they optimal?),

• ways to boost your super (can you make more non-concessional super contributions?) and

• need for a debt reduction plan.

While you may feel that everything is going as well as possible, the decisions you make now are likely to have a major influence on your eventual nest egg. Taking the time to understand what happens at Preservation Age is really important. Knowing and choosing the best options for your household means you will be creating the basis for the most stress-free retirement journey you can have. And if it all feels too much or too confusing, seeking advice from your super fund is a great place to get started.

Sixty is decision time is part three of the eight-part Road to Retirement series. Next time we explain the two different meanings of a ‘transition to retirement’ and how knowing and using these strategies can create a smoother path to life after work.

Want to learn more?

These two handy calculators on the Industry SuperFunds website will allow you to apply these thoughts to your own savings:

When can you access your super?

Your retirement needs calculator 

Stick with your Industry SuperFund in retirement and your money could go further. Visit compareyourretirement.com today.