Living in retirement


Retirement is a stage of life that many people look forward to and a handful of people try to avoid it at all costs.
One of the significant concerns that many have when staring down the barrel at potentially 30 years of retirement is “will my money last the distance?”

Fortunately, Australia has a very robust age pension system that provides for at least part of retirees’ retirement income. In fact, approximately 50% of senior Australians receive a full age pension while a further 25% receive a part age pension1.

However, an increasing number of Australians rely on their own savings, mainly through superannuation, to provide at least some of their income in retirement.

While the government provides an indexed means tested age pension, there is an expectation that people will use their superannuation and other savings to help support their retirement income needs.

Superannuation is not designed to enable people to accumulate wealth in a favourably taxed environment simply for it to be simply passed to the next generation. In fact, when superannuation is passed to beneficiaries, and particularly to adult children, of a deceased super fund member, a significant amount of tax may become payable.

An account-based pension is by far the most popular form of superannuation income stream product used in Australia today. An account-based pension can be provided by most retail and industry super funds, and self-managed super funds.

Once a person has met a condition of release – generally they have retired or they have turned 65 – they can access their accumulated superannuation savings and, rather than withdrawing a lump sum from the superannuation system, their accumulated super is used to commence an account-based pension.

An account-based pension pays a regular income at intervals agreed between the individual and their super fund. The income is calculated at the time the pension first commences, and then at the beginning of each subsequent financial year.

Superannuation law requires a minimum level of income is paid each year, based on the pensioner’s age on 1 July each year. There is no limit on the maximum amount of income that can be drawn each year, except when a pension is being paid under transition to retirement rules.


The method for calculating the annual minimum income is very simple.

The balance of the pension account is simply multiplied by a payment factor dictated by their age. The following table sets out the normal percentage factors:

Age Payment factor
Under 65 4%
65-74 5%
75 – 79 6%
80 – 84 7%
85 -89 9%
90 – 94 11%
95 and over 14%


While these are the “standard” payment factors outlined in the Superannuation Regulations, the minimum prescribed income has been temporarily discounted by 50% for the three financial years to 30 June 2022. Therefore, a person aged 65 to 74 needs to only draw 2.5% of their account balance in 2021-22 and will still comply with the regulations.

However, for many people using an account-based pension as the sole source of, or to supplement, their retirement income, reducing the amount received is not a viable option.

As most account-based pensions are “market-linked”, the account balance is influenced by positive and negative movements in underlying investment markets. These include the share market, property market, and interest rates, which are at an all-time low.

With Australian’s living much longer and healthier lives than our forefathers, our money needs to last a long time. Seeing our superannuation being eroded during retirement can be very disconcerting for many.
Often, the way people counter a decline in the value of their superannuation is to reduce the amount they draw as income each year.
If they don’t actually need the income, reducing the amount drawn, while still meeting the prescribed minimum imposed by government regulation, can be a viable option. However, for many reducing the amount of income being drawn is akin to taking a pay cut and has the effect of eroding lifestyle.

Sadly, I have seen too many cases over the years of seniors living in virtual poverty, too afraid to draw the amount of income they need, just so they can preserve their capital and leave a legacy to their children. Often it is these same children that are enjoying a significantly more comfortable lifestyle than their parents ever did.

Have sufficient income in retirement is a very real concern for many retirees, and those approaching retirement.


What steps can a person take to ensure they are well-positioned, at least financially, to ensure they will have sufficient income to live the type of retirement they dream of?

  1. Prepare a realistic “retirement lifestyle budget” well before retirement, and then practice living on that budget for six to twelve months before retiring,
  2. Carry out a financial stock-take to identify all savings, investments and super and ensure everything is in the most appropriate place,
  3. Consider retaining some workplace engagement by taking on some part-time or seasonal work, or generate income from a hobby, skill or experience,
  4. Explore entitlement to government benefits like the age pension and Commonwealth Seniors Health Card,
  5. Expect that accumulated savings will decline during retirement – the challenge is managing the erosion in an orderly manner,
  6. Be open-minded about using equity in the family home to supplement income in retirement, be it by downsizing or accessing equity via an equity release program such as the government’s Pension Loans Scheme.

For many, retirement will span 30 years or more. It is worthy of investing time in planning to ensure it has every possibility of being the retirement you have always dreamed of.

[1] 2021 Intergenerational Report – p. 112




Peter Kelly


Mark Teale



This is a publication of Alliance Wealth Pty Limited (AFSL 449221) and Professional Investment Services Pty Ltd (AFSL 234951), wholly owned subsidiaries of Centrepoint Alliance Ltd.

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