Retiring early is an exciting prospect, but without a solid financial plan, it can become a challenge rather than a reward. In Australia, early retirement requires careful savings, tax-efficient investment strategies, and a plan to bridge the gap until you can access your superannuation.
This guide will help you navigate early retirement planning. It covers key financial strategies, reducing expenses, and understanding Australia’s retirement laws.
Let’s Get Straight to the Point
If you want to retire early in Australia, you need to:
- Maximise superannuation contributions early to benefit from tax advantages.
- Build a financial bridge to cover expenses before accessing your super.
- Reduce major costs, such as mortgage repayments, to lower the amount you need to save.
- Plan for tax-efficient withdrawals to minimise the impact on your retirement savings
- Estimate your required retirement savings and develop a strategy to sustain income for 30+ years.
Now, let’s go through everything you need to know in detail.
Why More Australians Want to Retire Early
Many Australians dream of early retirement, where they can enjoy financial freedom, travel, or simply escape the daily grind. However, with rising living costs and longer life expectancies, planning is more important than ever.
A major reason people aim to retire early is job fatigue. Many seek financial independence sooner rather than later, whether due to physical strain, stress, or age discrimination in the workforce.
Another driver is increased life expectancy. The average Australian can expect to live beyond 85, meaning a traditional retirement at 67 could leave you with over 20 years of financial reliance. Retiring early means planning for even longer.
With Australia’s rising cost of living, early retirees need a strategy to maintain their desired lifestyle for decades.
Step 1: Taking Care of Retirement Savings First
How Much Do You Need to Retire in Australia?
Before planning an early retirement, determine how much money you’ll need. The ASFA Retirement Standard suggests:
- Single person: $50,000 per year for a comfortable retirement.
- Couple: $70,000 per year for a comfortable retirement.
These figures need adjustment for early retirees since you will need funds for more years.
The general rule is to save 25 times your desired annual spending. If you aim for $70,000 per year, you need at least $1.75 million in savings. However, this number increases if you retire earlier than 60 due to longer investment needs.
Superannuation: Why It Should Be Your Priority
While superannuation cannot be accessed until you reach your preservation age, it remains the most tax-effective way to save.
- Tax advantages: Super contributions are taxed at 15%, lower than most income tax rates.
- Compounding benefits: The longer your super grows tax-free, the larger your retirement fund will be.
- Government incentives: Salary sacrificing into super can significantly boost savings.
Making Extra Super Contributions
Since you have fewer working years when retiring early, maximising your super early is essential.
- Concessional contributions cap (2025): $30,000 annually (includes employer super and salary sacrifice).
- Non-concessional contributions cap (2025): $120,000 per year.
- Bring-forward rule: If you’re under 75, you can contribute up to $360,000 in one go.
Step 2: Building a Financial Bridge to Superannuation
What Is the Preservation Age?
Your preservation age is the earliest you can access your superannuation. In 2025, it is:
- 58 for those born between 1 July 1962 – 30 June 1963.
- 59 for those born between 1 July 1963 – 30 June 1964.
- 60 for those born on 1 July 1964 or later.
You must have alternative savings if you want to retire before this age.
Creating an Investment Portfolio for Early Retirement
You need investments outside superannuation to bridge the gap until you can access your super.
Options include:
- Exchange-Traded Funds (ETFs) – Low-cost and diversified.
- Dividend-paying shares – Provide a steady income stream.
- Real estate – Rental income can fund early retirement.
- Term deposits – Low risk for short-term needs.
A mix of these assets ensures flexibility and security.
Sustainable Withdrawal Strategy
You need a safe withdrawal strategy to ensure your money lasts.
The 4% Rule: Traditionally, retirees can withdraw 4% of their yearly savings. However, a lower withdrawal rate (3-3.5%) is safer for early retirement.
Using Dividends: Living off dividends instead of selling assets keeps your capital intact.
Reducing Tax on Withdrawals: Capital gains and investment income outside super are taxed, so structuring withdrawals efficiently is key.
Step 3: Reducing Expenses for an Easier Retirement
Why Housing Costs Are the Biggest Factor
Housing is often the biggest expense in retirement. In 2025, with average mortgage repayments at $3,500 monthly, retirees with mortgage debt may need over $1.3 million to cover housing costs.
Ways to reduce housing expenses
- Pay off your mortgage early to cut interest costs and lower retirement savings needs
- Downsize to free up capital and reduce maintenance and utility bills
- Move to a lower-cost area where property prices and living expenses are lower.
For those with investment properties, selling underperforming assets before retirement can reduce financial strain and free up funds.
Cutting Other Major Expenses
Lowering your cost of living extends your retirement savings and gives you more financial flexibility.
- Cancel unused subscriptions – Small recurring expenses add up quickly.
- Reduce insurance costs – Compare providers and adjust coverage to fit your needs.
- House hack – Rent a spare room or consider Airbnb for extra income.
- Buy a second-hand car – Avoid unnecessary car loans and depreciation costs.
- Cut utility bills – Use solar panels and energy-efficient appliances to reduce costs.
Small lifestyle adjustments, like cooking at home more often, can make a big difference over time, making early retirement more achievable.
Step 4: Understanding Taxes in Early Retirement
Superannuation Tax Rules in 2025
Once you reach your preservation age, you can transition to a retirement income stream, making withdrawals tax-free.
- $1.9 million tax-free cap – Up to this amount can be transferred into a pension account with no tax on withdrawals or investment earnings.
- Earnings in accumulation accounts – Any super above this cap remains taxed at 15%.
- Transition to Retirement (TTR) pensions – These are available before full retirement, but investment earnings are still taxed at 15%.
- Super death benefits tax – If left to non-dependents, withdrawals may incur a 15-17% tax.
Maximising super contributions and structuring withdrawals correctly can reduce taxes and extend your retirement savings.
Tax on Non-Super Investments
If retiring before the preservation age, you’ll rely on non-super investments subject to standard tax rates.
- Capital Gains Tax (CGT) – Selling assets held for over 12 months qualifies for a 50% tax discount, reducing taxable income.
- Franking credits – Dividends from Australian shares come with tax credits that can offset tax payable or provide refunds.
- Effective tax rate – Keeping investment income below $21,884 (2025 tax-free threshold) can minimise tax liability.
- Trusts and investment structures – Tax-efficient setups like investment bonds or family trusts can lower taxable income.
- Offsetting losses – Capital losses can be carried forward to reduce future capital gains tax.
Smart tax planning helps early retirees minimise tax, maximise income, and protect savings for the long term.
Conclusion
Planning for early retirement in Australia is all about smart saving, investing, and spending.
- Boost superannuation early to maximise tax benefits.
- Create an investment bridge to fund the years before super access.
- Cut unnecessary costs, with a focus on paying off the mortgage.
- Plan tax-efficient withdrawals to extend retirement savings.
The key to financial independence is having a plan. Whether you want to retire at 50, 55, or 60, the right strategy makes early retirement possible.
Are you planning to retire early? Let us know in the comments!
The amount you need depends on your desired lifestyle. A single person typically needs at least $1.5 million to $2 million, while couples may need $2.5 million or more. The earlier you retire, the more savings you need to cover a longer retirement.
No, you cannot access your superannuation until you reach your preservation age (between 58 and 60, depending on your birth year). If you retire before this, you’ll need investments outside super to cover your expenses until you can access your super.
For most Australians, housing costs are the biggest expense. Paying off your mortgage early or downsizing can significantly reduce the amount you need to retire. Other major expenses include healthcare, travel, and lifestyle costs.
To minimise tax, consider using franking credits, spreading out capital gains, and keeping income under the tax-free threshold where possible. Once you reach preservation age, you can access up to $1.9 million in super tax-free in a pension account.
The time needed depends on your current savings rate and financial strategy. Most Australians aiming for early retirement need at least 10-20 years of disciplined investing, cutting unnecessary expenses, and maximising super contributions.
