In this guide
- Poor health and early retirement: the sobering financial facts
- Retiring early due to ill health: What can I do?
- Step 1: Work out your financial position
- Step 2: Set a retirement budget
- Step 3: Check if you can access super
- Step 4: Apply for your super benefit (if needed)
- Step 5: Apply for the Age Pension
- Step 6: Review your housing options
Nobody expects to become sick. Even fewer of us think declining health will see us leaving employment earlier than we want, but it’s quite common.
So, what can you do if you’re forced to retire early?
Poor health and early retirement: the sobering financial facts
According to research by the Australian Bureau of Statistics (ABS) on retirement and retirement intentions, 13% of people who retired in 2022–23 left their last job due to sickness, injury or disability. That’s 16,900 people from the 130,000 that retired during the financial year.
What’s more concerning is that early retirement due to ill health is often not only hard to accept if you planned to continue working, but it also has a major impact on your retirement finances.
Studies from around the world have found people who retire early due to ill health are more likely to be in income poverty than those retiring early for other reasons.
A 2018 report by the McKell Institute on the impact of ill health on retirement savings found Aussies retiring early (aged 50–54) due to ill health lose up to $142,100 in super. This consisted of $118,600 in foregone super contributions from working longer and $23,500 in early super withdrawals. The financial losses are greatest the earlier you retire, but even in your early 60s the knock to your super balance can be significant.
Case study: Financial impact of retiring early
Russell is aged 60 and his current salary is $90,000. His employer is paying the normal 11.5% Superannuation Guarantee (SG) contribution into his super account, or $10,350 in 2024–25. In 2025–26 the rate will increase to 12% ($10,800 per year).
Due ill health, Russell is forced to retire five years earlier than planned.
This means he will have $53,500 less in employer contributions added to his super account than if he had left work as planned at age 65.
$10,350 (2024–25) + $10,800 x 4 (following four financial years) = $53,550 .
After the 15% contribution tax is deducted, this means $45,517.50 less in Russell’s super account at retirement. He also misses out on the compound investment returns the contributions could have earned over that five-year period.
Retiring early due to ill health: What can I do?
Although there’s little you can do if forced to retire early due to ill health, you can take some simple steps to protect your finances:
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