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How to calculate your retirement age and how much will the Pension help?

If you are looking ahead to your retirement and are ready to start planning for what that may look like, you may be wondering how you will afford things once you retire.

Last updated: December 16th 2021
These are vital areas that need to be accounted for when making your retirement plan, including where the Age Pension comes in. [Source: Shutterstock]

These are vital areas that need to be accounted for when making your retirement plan, including where the Age Pension comes in. [Source: Shutterstock]


Key points:

  • The Age Pension is a safeguard for older Australians who run out of money or don’t have enough savings, super or investments to fund their retirement
  • Retiring early can impact your retirement savings and super, and may result in you receiving the Age Pension sooner
  • Living on the Age Pension can change your whole lifestyle in retirement
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Not having a regular income can be scary and stressful. However, you can always be assured that if you run out of money during retirement, the Age Pension is there as a fallback.

The Age Pension, a form of Government income support, will only provide a modest lifestyle and you likely won’t live an extravagant retirement lifestyle.

When looking at your retirement, you need to plan what you may look like as well as if you may need to receive the Age Pension in your retirement.

You may have savings and superannuation saved up to cover your expenses during some of your retirement, but you may run out of your retirement funding and need to start transitioning to a part pension or full Age Pension.

So how can you plan your retirement with the Age Pension in mind?



Your age matters when retiring

What age you retire at is really important when it comes to planning for that big period of your life, as you need to be aware of how you will fund your retirement once you no longer have incoming funding from work.

If you retire early, for example when you hit your super preservation age – the age you are allowed to access your super – then you will be cutting into your retirement funds well before you are eligible for the Age Pension.

Living off just your savings and super is a big chunk of money, and it would impact how long your savings last in retirement. You won’t be able to access the Age Pension until 66-67 years of age, depending on the year you were born, and if you retire early and run out of super and savings, you may have to look at other payments, such as the JobSeeker Payment, to get you by.

The general life expectancy of older Australians is in their 80’s. If you retire at 65 then you have around 20 years that you need to fund. If you start drawing on your super and savings early, then you may not make your retirement funding last, which could result in you having to access the Age Pension sooner rather than later.

These things need to be thought about early, because for some people, retiring isn’t always a choice. You can never know what is around the corner as you get older. If you are injured at work, have taken up intensive caring duties, or struggle to find work, you may have to retire earlier than expected.

If you don’t have a choice in retiring, you may be constantly wondering how you will pay the bills. Planning is key to keeping on top of your finances and planning for the unexpected.

You don’t want to receive the Age Pension earlier than intended or unexpectedly, you should be prepared and understand when your super may run out.

Living on the Age Pension

In 2018 19, 49 percent of male retirees and 44 percent of female retirees received the Age Pension.

While you can always consider the Age Pension as a safeguard from poverty when you are older, if you can, you want to live on your own super and savings for as long as possible as the Age Pension only provides a modest lifestyle.

So, what does a modest lifestyle look like when living on the Age Pension?

You will likely need to budget for day-to-day expenses and won’t be able to afford large impulse purchases. You might participate in free or inexpensive activities, hobbies, and leisure options; you will make use of “seniors’ meals” at pubs and can get cheap takeaway every now and then; you will not have a budget to make urgent repairs on a car or broken things at home will be too expensive to repair; and you cannot afford private health insurance.

Living on the Age Pension can have an effect on how you live life in retirement. So it’s important to know when you may need to start receiving the Age Pension.

Having a loose budget plan can help you figure out what your necessary costs are in retirement. This expenditure includes:

  • Accommodation (mortgage, council taxes, etc)
  • Electricity and gas
  • Clothing and shoes
  • Food (including takeaway or special occasions)
  • Phone and internet
  • Transportation (Petrol, car repairs, public transport, etc)
  • Health (medication, medical appointments, ongoing fitness, etc)
  • Household products (cleaning products or services)

These are vital areas that need to be accounted for when considering your retirement plan and whether the Age Pension will cover your necessities. Other important areas include activities and leisure, and travel.

Although, in recent years, the Age Pension hasn’t been enough for many older Australians, with inflation, the rental and housing crisis all pricing many people out of even living modestly.

In 2023, Anglicare Australia’s Rental Affordability Snapshot of over 45,895 listings paints a grim picture.

Of the listings, 162 rentals (0.4 percent) were affordable for a person on the Age Pension and 508 rentals (1.1 percent) were affordable for a couple on the Age Pension.

Impacts on the Age Pension

There are a number of different things that can impact how much you receive through the Age Pension.

You can receive the Age Pension if you are still receiving income through your super or through investments. However, that depends on how you access your super.

If you take out your super as a lump sum, then you will likely not be able to receive the Age Pension, as Centrelink/Services Australia checks your super balance when calculating how much of the Pension you will receive.

But if you organise your super into ongoing incoming streams, you may be able to have Age Pension payments coming in to top up the money you are receiving from your super.

This can not only help your super last longer into retirement, but can also ease you into life on the Age Pension.

Another consideration to make when planning for the Age Pension is whether you intend to continue working part time in retirement. Generally, you can work a full day of work at minimum wage before that income begins to impact the Pension.

It is important you understand to what level working will change how much you receive in Pension.

The best person to talk to about what can impact your Age Pension, to receive information on transitioning to retirement, or organising your retirement plan, talk to a financial advisor.

Although, Government website MoneySmart’s retirement planner may be up your alley if you’re looking to get a rough idea of what you need in about 5 minutes.

Have you made a retirement plan? Where does the Age Pension figure into that? Tell us in the comments below.

Related content:

Your Age Pension explainer: What you need to know
What do I need to prepare for my Age Pension application?
Preparing yourself for retirement

Article originally published 16/12/21 by author Liz Alderslade

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