By Paul Feeney, Founder and Chief Executive Officer, Otivo
Winding down gets filed as a lifestyle preference — something for people who like their job or fear the void. It's usually better understood as arithmetic. Two days a week from 62 to 66 might bring in $200,000 of income across four years, cover most of the gap before the Age Pension starts at 67, and add four years of employer contributions on the way through. That's not a soft preference. That's the difference between a plan that holds and one that doesn't. Here are five ways Australians do it, and what each does to the super side.
Common options include reducing days with the same employer, moving to a less demanding role, shifting to contract or consulting work, seasonal or casual work, and combining part-time work with a transition to retirement pension. As at August 2026, employer super guarantee of 12% continues on employment income, and any Age Pension entitlement cannot begin before 67.
Why winding down is a funding decision
Because employment income in the years between 60 and 67 does two jobs at once.
It covers spending that would otherwise come out of super, and it keeps employer contributions of 12% flowing in. A 62-year-old earning $45,000 part-time is both drawing less from a balance and adding $5,400 a year to it — a swing that compounds across every year the arrangement runs.
The gap years are where this matters most. Nothing is payable from the Age Pension before 67, so anyone finishing entirely at 60 funds seven years unaided. Part-time income doesn't need to cover all of it to change the outcome materially; covering half of it changes the required balance substantially.
The five options
Reduced days with the same employer. The simplest arrangement, and the one that preserves the most — existing pay rate, accrued entitlements, super contributions, and often insurance held through the fund. Whether it's available depends on the role and the employer rather than on any legislated right, though flexible working arrangement provisions exist for some employees and the Fair Work Ombudsman publishes the current rules.
A less demanding role. Stepping back from management, moving to a specialist or mentoring position, or shifting to a role with less travel. Income usually falls, but so does the reason for leaving — this is the option that most often addresses the actual problem where the issue is intensity rather than the work itself.
Contract or consulting work. More control over volume and timing, and often a higher hourly rate. It also changes the super position: contractors are not always entitled to employer super guarantee, and where they are treated as self-employed, contributions become a personal matter. Being genuinely self-employed also brings different tax and reporting obligations, which is a question for an accountant rather than for a super article.
Seasonal or casual work. Concentrated periods of work with long gaps — common in trades, agriculture, education and tourism. It suits people whose spending is lumpy and whose energy for work is intermittent.
Part-time work alongside a transition to retirement pension. From 60, a transition to retirement pension can pay income while employment continues, which allows reduced hours without a matching drop in total income. The pension pays between 4% and 10% of its account balance each financial year. The mechanics are in what is a transition to retirement pension and how does it work.
What happens to super while you wind down
Four effects, and they don't all point the same way.
- Employer contributions continue, at 12% of ordinary time earnings, on whatever employment income remains. Lower pay means lower contributions, but not none.
- Contribution capacity may fall. For 2026–27 the general concessional contributions cap is $32,500 combined across employer super guarantee, salary sacrifice and personal deductible contributions. Reduced income usually means less capacity to use it, though carry-forward may lift the effective cap in a given year for members with a Total Super Balance below $500,000 on 30 June of the prior year — see how carry-forward concessional contributions work.
- Insurance held inside super can be affected. Cover is generally attached to an account and funded from its balance, and some cover has occupation or hours-based conditions. Terms differ between funds, so the fund's own documentation is the reference point. Covered in what happens to your insurance when you retire.
- The retirement condition of release stays out of reach. Retirement generally means ceasing gainful employment without intending to return to work for 10 or more hours a week, so someone working 15 hours a week hasn't met it. Turning 65 is a condition of release regardless of hours.
That last point is worth underlining, because it surprises people. Winding down is not the same as retiring in the legal sense, and the distinction determines whether super is fully accessible. See when you can access your super and what counts as retiring.
Does working part-time affect the Age Pension?
After 67, employment income is assessable under the income test, and the Work Bonus provides a concession for earnings from work that reduces the amount counted. Both the income test thresholds and the Work Bonus are indexed, and Services Australia publishes the current figures.
Before 67 the question doesn't arise, since no entitlement exists. This is one reason working past 67 rather than before it appeals to some people — the Work Bonus means part-time earnings and a part pension can coexist more comfortably than a flat reading of the income test suggests.
What tends to go wrong
Three things.
The arrangement is agreed informally and then erodes. Three days becomes four, then five with three days of pay. Getting the arrangement documented is what prevents this, and it's an employment matter rather than a financial one.
Insurance lapses unnoticed. A drop in contributions can leave an account balance too small to sustain premiums, and cover at 62 is harder and dearer to replace than cover at 42.
The maths is never done. Winding down often gets treated as a mood rather than a plan, so nobody establishes whether three days a week for four years closes the gap or merely delays confronting it.
Frequently asked questions
Can you reduce your hours and still get employer super contributions?
Yes. Employer super guarantee of 12% applies to ordinary time earnings, so contributions continue on reduced pay. The amount falls with the hours, but the entitlement doesn't disappear.
Does winding down count as retiring for super purposes?
Generally no. The retirement condition of release requires ceasing gainful employment without intending to return to work for 10 or more hours a week. Working part-time above that threshold means it hasn't been met, though turning 65 is a condition of release on its own.
Is it better to work part-time or draw more from super?
Both are used and the trade-off differs by situation — part-time work preserves the balance and adds contributions but requires the work to be available and sustainable. The comparison is a numbers exercise rather than a general rule.
Can you go back to full-time work after winding down?
Yes. Nothing in the super rules prevents it. Where a retirement condition of release has already been met, returning to work doesn't reverse the status of benefits already accessible.
Where this leaves you
Winding down is the most underrated lever in the whole transition, because it works on both sides of the equation at once — less drawn down, more paid in, and fewer unsupported years before 67. It's also the option most likely to go unmodelled, since it looks like a lifestyle question. Otivo, a digital financial advice platform licensed under AFSL and Australian Credit Licence No. 485665, has a retirement planning module that models salary, balance, other investments, super access age and Age Pension eligibility together, which is where a part-time scenario can be compared against a clean finish.
Sources
- ATO, Transition to retirement. ato.gov.au
- ATO, Contributions caps. ato.gov.au
- Services Australia, Assets test for Age Pension. servicesaustralia.gov.au
Disclaimer
The information in this communication is current as at August 2026 and has been prepared by Otivo Pty Ltd ABN 47 602 457 732, AFSL and Australian Credit Licence No. 485665. This content is general information only and has been prepared without taking into account your objectives, financial situation or needs. It is not personal financial or taxation advice and should not be relied on as such. Before acting on any information, you should consider its appropriateness having regard to your personal circumstances. This material must not be reproduced in whole or in part, or posted on any social media platform, without the prior written consent of Otivo Pty Ltd.