How retirement works

Retirement is that time in your life when you finish working for an employer and rely on other sources of income and your retirement savings. In Australia, our retirement system has three pillars:

  • Age Pension
  • This is a safety net for people with little or no super or other savings. If you’re eligible, the Commonwealth Government can provide you with the Age Pension which would cover you for very basic needs.

  • Compulsory super savings
  • While you’re working, your employer has to make a contribution into your super fund on your behalf. The current rate is 9.5% of your salary, and it is prescribed by law. This is called the Superannuation Guarantee (SG). The SG rate remains 9.5% until 1 July 2021. It is then set to gradually increase to 12% by 1 July 2025.

  • Voluntary super savings
  • For most people it is unlikely that SG and the Age Pension (if you are eligible) would be enough to live a comfortable lifestyle in retirement. For this reason, the government encourages people to save extra for retirement. If you add to your retirement savings through your super, you can take advantage of some tax incentives.

When can you retire?

In most cases, you can retire and get your super money when you reach your Commonwealth preservation age. See the table below to work out when you can get your super.

Commonwealth preservation age

Date of birth

Commonwealth preservation age

Born before 1 July 1960


1 July 1960 - 30 June 1961


1 July 1961 - 30 June 1962


1 July 1962 - 30 June 1963


1 July 1963 - 30 June 1964


After 30 June 1964


Plan your retirement

When you’re working out how your retirement will work, it’s worth considering:

  • What kind of lifestyle do you want in retirement?
  • Do you have other investments or are you only relying on your super?
  • Would you qualify for the Age Pension?
  • How can you take charge of your super now?

Let’s look at these questions in more detail.

What kind of lifestyle do you want in retirement?

The Association of Superannuation Funds of Australia (ASFA) reports regularly on the annual cost for singles and couples to achieve either:

  • A ‘modest’ retirement - which is better than relying on the Commonwealth Government’s Age Pension alone, but only allows for fairly basic activities
  • A ‘comfortable’ retirement - which represents a good standard of living with enough to spend on a range of leisure activities and household goods, private health insurance, a reasonable car, good clothes, a range of electronic equipment and some travel

Based on ASFA research1, here are the estimated budgets for various households and living standards for people aged around 65.

Cost of living in retirement
Living standard Single annual cost Couple annual cost







As you get older, the budgets change.

Find out more about cost of living in retirement

Do you have other investments or are you only relying on super?

You might have retirement income from a couple of sources. You can combine these income sources so your money lasts longer and you have a more comfortable retirement. It's worth remembering that one income source can have an impact on another source. For example, if you decide to sell the family home, your Age Pension may be reduced or cut off.

Depending on your circumstances, you may want to seek financial advice to make the most of your retirement income.

Find out more about getting financial advice

Would you qualify for the Age Pension?

Your super will help you enjoy a more comfortable retirement than just relying on the Age Pension. The Age Pension is designed to provide a ‘safety net’ for people who do not have enough super or other financial resources to provide an adequate retirement income.

So the Age Pension works in conjunction with super. Most people can be eligible for a full or part Age Pension, supplemented by whatever super they receive.

The impact of a super lump sum or pension

When you are allowed to access your super, you choose to take either a lump sum from your account - or take a bit at a time as a regular income in the form of a pension.

The way you access your super could impact the amount of tax you pay and also your entitlement to a Commonwealth Government Age Pension.

Centrelink can provide you with more details on how your Age Pension entitlements could be affected by the way you withdraw your super. The rules are designed to encourage people to take their benefits as a pension over time rather than as a lump sum.

Find out more about the Age Pension

How to take charge of your super now

You can take some simple steps today to help make a big difference to the way you manage your super in the lead up to retirement:

Retirement tips

1 The Association of Superannuation Funds of Australia (ASFA), Retirement Standard, aged around 65, March quarter 2021.

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Page last updated 04 May 2020