Can I Retire Before 60? How to Work Out If You Can Afford It
A lot of the people I work with are in their 40s and 50s, and I hear the same question in different forms all the time.
I'm earning good money, but do I really want to keep doing this for another 10 or 15 years?
For some people, it's the pressure of a senior role that has become too much. For others, it's wanting more time to help care for ageing parents. And sometimes it's simply getting to the point where work has taken up enough space in life and they'd like a bit more choice.
The short version: retiring or reducing work before 60 often looks more achievable once you stop treating it as one enormous number. If your superannuation is on track to support you from age 60 onwards, the problem you actually need to solve is funding the years between stepping back and reaching that age. That is usually a smaller and more defined problem than building enough outside super to support yourself indefinitely. Whether it works in any particular case depends on your own spending, debt, assets and circumstances.
That's what I talk about in this episode of the Financial Autonomy podcast, and go into more detail below.
Can I retire before I can access my super?
Possibly, but you need to solve two different parts of the plan.
The first is the period before 60.
The second is what happens from 60 onwards, when your super can start doing more of the heavy lifting.
When I'm helping a client with this, I want to know whether their super is on track first. If it is, then we can focus on how to fund the gap before they can access it. That's a much smaller problem than trying to build enough money outside super to support yourself forever.
Worth noting that preservation age is now 60 for anyone born on or after 1 July 1964, which covers essentially everyone currently in their 40s and 50s. Whether your super will actually be sufficient from that point depends on your balance, contributions, returns, fees and the rules in place at the time. Superannuation legislation changes, so this is something to model and review rather than assume.
How much money do I need to retire early?
There isn't one answer.
It depends on what you spend, what debt you still have, what you've already built up and whether you're happy to keep earning some income.
In the episode, I use a simple example. Say you stopped work at 50 and needed $100,000 a year. If your super was already on track to look after you from 60, then you're funding a 10-year period. Setting aside tax, inflation and investment returns for a moment, that's a pool in the order of $1 million rather than the much larger figure people usually have in mind.
That is very different from thinking your investments need to provide $100,000 a year forever.
This is a simplified illustration to show the difference in scale. It isn't a projection, and your own figure will depend on your circumstances.
Do I need enough passive income to retire early?
No, and this is one of the ideas I think can make financial independence feel much harder than it needs to.
If you wanted $100,000 a year from investments and assumed a 4% income rate, you'd need about $2.5 million invested to generate that without touching the capital.
That's a huge target. Compare it to the roughly $1 million in the example above and you can see how much difference the approach makes, not the goal.
But if you know your super is there from 60, then drawing down some of your other investments beforehand can be a perfectly reasonable strategy.
The 4% figure is used here to illustrate the point. It's not a forecast of returns, and actual returns vary and can be negative.
Obviously, you need to run the numbers properly and keep checking them. The last thing you want is to get to 57 or 58 and realise the plan was too optimistic. A run of poor returns early on hits harder when you're drawing money out at the same time, so this approach needs conservative assumptions, a buffer, and regular review.
But the idea that you can only retire once your investments produce enough income forever can keep the finish line a lot further away than it needs to be.
Should I pay off my mortgage before I retire?
Debt can make a big difference to how much income you need each year.
For a lot of households, the mortgage is the biggest regular expense they have. Remove that, or reduce it substantially, and the amount of income you need each year can fall a lot. Less income required means less capital required to produce it.
That doesn't mean the only strategy is to spend the next decade smashing the mortgage.
You might downsize once the kids move out. You might move somewhere less expensive. You might sell an investment later and use the proceeds to clear what's left. Each of those has its own considerations, though. Selling investments can trigger capital gains tax. Downsizing carries transaction costs and can affect super contributions and any future Age Pension entitlement. Directing surplus to debt rather than super is a trade-off that suits some people and not others.
The point is that financial independence isn't only about how much you can accumulate.
It's also about how much you actually need.
Can I retire early and still work part-time?
This is probably where my idea of financial autonomy is a bit different from the strict definition of financial independence.
Technically, financial independence means you don't need to work at all.
But most people I meet don't actually want to do nothing.
What they want is choice.
They might still enjoy their profession, but hate the management role they've ended up in. They'd happily work three days a week, take a lower-paid job with less responsibility, or work contracts and have decent breaks in between.
I have a couple of clients in IT who do three-to-six-month contracts and then take time off before the next one. That gives them the flexibility they're after without needing to stop earning altogether. It also means less of their capital is being drawn down, which reduces the risk in the plan.
For me, that's the whole point.
You don't necessarily need to replace every dollar of employment income. You need enough financial flexibility to make different choices.
How do I know if I can afford to retire early?
This is where generic retirement numbers stop being very useful. Two people can have exactly the same amount of money and need completely different plans.
One wants to stop work altogether at 52. Another would be very happy working three days a week until 60. One has a mortgage. One doesn't. One wants to travel. Another wants a quieter life closer to home.
So the question I'd be asking is not just how much do I need?
It's: what do I want my life to look like, and what does my current financial position make possible?
Answering that means modelling your super, debt, investments, spending and future income together, and then testing it against a poor run of returns rather than an average one. That's the work that turns an age you have in mind into a plan you can act on.
Want to know if you can afford to retire before 60?
If you've got an age in mind, the next step is working out whether the numbers actually support it.
At Guidance Financial Services, we help clients model their super, debt, investments and future income so they can see what working less or retiring earlier could realistically look like.
If you'd like help building a plan around that, book an initial appointment with us.
Frequently asked questions
Can I access my super before 60? Generally no. Preservation age is 60 for anyone born on or after 1 July 1964. There are limited exceptions, such as permanent incapacity, but for most people planning to reduce work before 60, super won't be available and the gap needs to be funded from other sources.
How much do I need to retire early in Australia? There's no universal figure. It depends on your annual spending, whether you own your home outright, how long you need to fund before super becomes accessible, and whether you'll keep earning any income. The useful exercise is calculating your own number rather than comparing yourself to a benchmark.
Can I live off dividends without touching my capital? You can, but it requires considerably more capital than a strategy that draws down over a defined period. Funding $100,000 a year from investment income alone at a hypothetical 4% rate implies roughly $2.5 million. Whether preserving capital or drawing it down is appropriate depends on your circumstances, timeframe and comfort with risk.
Should I retire, then pick up part-time work? It's a common plan, but the superannuation rules matter here. Accessing super on the basis of retirement requires meeting a condition of release, and arrangements structured purely to trigger access aren't permitted. If you're thinking about ceasing work and then returning part-time, the timing and sequencing are worth getting advice on beforehand.
Is it too late to become financially independent in my 50s? Not necessarily. Starting in your 50s means a shorter runway, but it also means a shorter gap to fund before super becomes accessible, and usually higher income and more accumulated assets than someone starting in their 30s. What's achievable depends on your specific position.
Paul Benson is a Certified Financial Planner and Practice Principal at Guidance Financial Services, and host of the Financial Autonomy podcast, helping people in their 40s and 50s build enough financial flexibility to have choice about how and when they work.
This article is for educational purposes only and does not take into account your individual circumstances. If you would like tailored advice, we can help you work through the numbers properly.
