Why Australians Are Working Longer and Retiring Later

Australian Bureau of Statistics (ABS) figures for the 2020-21 financial year shows the average retirement age was 56.3 years, which was one year later than the average from 2018-19. Women typically retire earlier than men, but the data finds women are retiring later than they have previously.

The top reasons retirees left the workforce included:

• Reaching the age of eligibility for the age pension or access to their superannuation;
• A disability, injury or becoming unwell; and
• Being retrenched and not being able to find work.

The ABS data also revealed that current workers who intend to retire, on average expect to do so by the time they reach 65.5 years old. Rising expenses and stagnant wage growth may be leading to a larger gap between expected retirement age and the realistic point at which people can fund their retirement.

The Association of Superannuation Funds of Australia’s Retirement Standard recommends that to retire by 67 and live comfortably, single people need lump sum super balances of $595,000 and couples need $690,000. A recent survey by accountancy firm Findex found that two in three respondents feared they wouldn’t have enough saved for retirement—and baby boomers were the least confident in their financial readiness for retirement.

Related: How Much Super Do I Need to Retire?

Every retirees’ circumstances are unique, but there are several common reasons why Australians choose to remain employed beyond the usual retirement age, or return to work in some capacity after previously retiring.

Increased cost of living

Modest savings or dwindling retirement incomes that can’t withstand increasing cost-of-living pressures is the key reason Australians keep working or return to work after retirement. A National Seniors Association report from 2022 found 17.3% of more than 3,000 retirees surveyed had re-entered the workforce since retiring and a further 18.5% were considering it—primarily to earn money. More than 100 respondents reported that financial stress, and not being able to live solely on the age pension, was a motivator.

Age pension eligibility changes

In advanced economies like Australia, with good living conditions—people are living longer. An ageing population puts pressure on government budgets, especially when it comes to healthcare and funding pensions. Since 2017, the minimum age at which Australians qualify for the aged pension has been increasing (from 65), resulting in a multi-tiered eligibility criteria depending on your date of birth. People born on or after 1 January 1957 now have to reach 67 years of age before they’re entitled to support.

Attractive work opportunities

Increased availability of flexible work, in particular, is appealing for many older Australians who’d prefer to stay active and ease into retirement by working part-time. With low unemployment across the country, employers looking to acquire talented people may be more open to diverse hires, negating some of the impacts of ageism in the recruitment process. In fact, some industries are facing a significant ‘retirement cliff’ set to trigger skills shortages unless older workers can be retained.

Boredom and loneliness

According to the Australian Institute of Health and Welfare, in addition to financial needs, a number of Australians who retire choose to return to the workforce due to boredom or because of reduced carer commitments or the loss of their partner. Many people achieve a sense of purpose, self-esteem, and community through engaging with colleagues and clients and contributing to society through work.

There’s an increasing trend for older Australians to keep working after the traditional retirement age. OECD data shows that in the decade to 2022, the rate of people aged over 65 years participating in work more than doubled (from a participation rate of 6.4% in 2001 to 15% in 2022).

Australians over 65 in the workforce from 2002-2022 compared to OECD average (black line). Source: OECD.

A 2023 report commissioned by Amazon, in partnership with well-known demographer Bernard Salt, on changing workforce trends in people over 55 found that many Australians are slowing down and gradually transitioning to retirement.

Amazon’s report found 24% of people aged over 55 had changed careers in the last five years in order to reduce their workload and stress as they faced a longer working life. This is backed by 2021 research from Australian Seniors, which found three in four over 50s were planning to re-skill or undertake professional development to increase the longevity of their careers.

Unfortunately, not all Australians will enjoy good health as they continue to work into older age. A longitudinal study of more than 10,000 middle-aged Australians found that a 50-year-old can expect to be healthy for less than 80% of their remaining working life. Healthy working life expectancy is worse for less educated people—those who left school before completing Year 12 will work for more years in poor health.

The two main ways Australians draw on money in retirement or semi-retirement include:

• Accessing their super and relying on other savings or investments as a self-funded retiree. Australians can start tapping into their super funds between 55-60 years old (depending on your year of birth) provided you’ve stopped working, or when you reach 65 even if you’re still employed. You can access your super as a lump sum or receive regular payments—and a decision to return to work post-retirement won’t affect either.
• Receiving the age pension, which is subject to various age, income and asset tests (this includes investments and super) in order to qualify. The maximum rate for single people is just over $1,000 a fortnight, while couples get $755.70 each. Earnings from paid employment, including self-employment, will affect your fortnightly pension payments which are subject to an income test. The Australian Government has made it easier to work without reducing your pension: single pensioners with no other income can earn up to $504 a fortnight under the ‘Work Bonus’.

Depending on the value of the assets you own and how you handle your super balance at retirement (e.g., lump sum or income stream), you may be able to draw from your super in addition to receiving the age pension and earning money from work.

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