How to time your retirement

There are many factors to consider when deciding when to retire. Some people do not have a choice, finding themselves out of work before they reach retirement age, where others plan to retire on the day they become eligible for the Age Pension.

After working for most of your adult life, no-one will begrudge you taking the retirement option at the first possible opportunity. However, there is actually a perfect time to retire, and it all concerns when you take your leave entitlements.

One of the first decisions you will have to make as you approach your retirement is what to do about your leave entitlements from your employer. Do you want them paid out in a lump sum or would you prefer to take your leave before you retire?

The best thing to do in this situation is to take your leave prior to retirement. There are two reasons for this.

Firstly, if you have a considerable amount of leave accrued with your employer, you can continue to earn extra leave while you are taking your break.

Secondly, your employer continues to pay superannuation into your account while you are taking whatever leave entitlement you are owed.

However, if you would prefer to take your leave entitlements in one lump sum, you have to think about timing your retirement to suit.

The reason is the taxman.

If you retire before the end of the financial year, your lump sum leave entitlements will be added to your earnings and could potentially lift you into a different tax bracket. This could result in you owing the Australian Taxation Office money when you complete your tax return.

The alternative is to retire early in the financial year and try and keep your earnings down so that your leave entitlements attract the lower tax rate, making a big difference to the way you start your retirement.

What considerations do you think people need to consider most when they are retiring?

Related articles:
Are you ready to retire quiz
Should you work for longer?
Are you ready to retire early?

Written by Ben Hocking

Ben Hocking is a skilled writer and editor with interests and expertise in politics, government, Centrelink, finance, health, retirement income, superannuation, Wordle and sports.

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