A couple I worked with last year were both 58 when the husband's role was abolished in a restructure. He'd been with the same engineering firm for more than twenty years and was the main income earner, while she worked three days a week in a school office. The redundancy came with a payout worth a little over a year's salary, and by the time they sat down with me they'd already had several weeks of well-meaning advice from friends and family. Upgrade the car. Take a trip. Put it all into super. Retire now and enjoy it.
Their own question was simpler. Could they afford for him not to go back to work?
Before answering, I asked what they spent in a typical year, and what income they thought they'd want if he didn't return to full-time work. It was the first time in weeks anyone had asked about their spending rather than the size of the payout, and it changed the conversation. The payout was a large number, but on its own it couldn't tell them whether they could retire. That depended on how long it had to last and what it had to do.
What the payout is made of
A redundancy payment usually arrives as a single amount, but it's made up of several parts. There's the redundancy component itself, often a set number of weeks' pay for each year of service, along with any unused annual leave and long service leave. Where the redundancy is genuine, meaning the role itself no longer exists, part of the payment is tax-free. The employer works out the tax and withholds it before the money is paid, so there's nothing to calculate and no decision to make on that front.
What's worth checking is the final pay slip and the payment summary, mainly to understand how much of the payout was leave, how much was redundancy, and what has already been taxed. It's also worth finding out whether any life, disability or income protection insurance was held through the employer's super arrangement. That cover can end or reduce when employment ends, and it's easy to miss among the paperwork.
A bridge, or the beginning of retirement?
The bigger decision is what the payout is for. For some people, a redundancy at 58 is the push into a retirement they were already planning a few years later. For others, it's a gap between jobs, or the start of a slower phase of part-time or consulting work. Each of those calls for a different plan for the money.
Age matters here more than most people expect. From 60, leaving a job generally means you can access your super, so a redundancy at 61 opens up options that a redundancy at 58 doesn't. Before 60, super normally stays locked away. That means the payout and any other savings may need to cover living costs for several years before super can be drawn on, and longer still before the Age Pension becomes a consideration at 67.
For this couple, the numbers showed that his payout, her part-time income and their existing cash savings could cover their spending until he turned 60, with super taking over from there. What the numbers didn't support was spending a large slice of the payout in the first year and then discovering at 60 that the bridge was shorter than they'd assumed.
Putting the payout to work
Once the bridge was mapped out, the remaining question was where the rest of the money should sit. The first step was a cash buffer large enough to cover a year or two of spending, held somewhere easy to reach. Beyond that, the payout created an opportunity that's easy to overlook. Contributing part of it to super can be tax-effective, depending on the rest of that year's income, within the annual limits on how much can go in. Some people can also use unused contribution amounts carried forward from earlier years, which can make a real difference in a year like this one. Both need to be worked through carefully, because money contributed to super before 60 is out of reach until then.
Looking for another role was still on the table, and the plan didn't rule it out. Knowing the money would carry them through to 60 meant any work he took on would be by choice rather than necessity, and that changed how he approached the job market.
They didn't buy the new car, although the trip was booked for the following year and paid for from money set aside for it. The payout was no longer a large sum they were nervous about touching, it was the first stage of a retirement plan with a clear timeline for each step.
References
Australian Taxation Office, Redundancy payments, accessed 3 November 2026.
Australian Taxation Office, Employment termination payments, key superannuation rates and thresholds, 2026-27 income year.
Australian Taxation Office, Unused annual leave, accessed 3 November 2026.
Australian Taxation Office, Conditions of super release, accessed 3 November 2026.
Moneysmart (ASIC), Insurance through super, accessed 3 November 2026.
Australian Taxation Office, Contributions caps, key superannuation rates and thresholds, 2026-27 income year.
Services Australia, Age Pension, who can get it, accessed 3 November 2026.