Make my retirement funds last the distance

Retirement should be a time when we reap the rewards of our working life, and being able to enjoy your preferred lifestyle calls for some planning.

Maintaining your desired lifestyle during retirement 

Australians are living longer and if you hang up your work boots at, say, age 65 and live to age 90, you need to plan for the possibility of a quarter of a century in retirement. That’s a wonderful thought! But will your money last the distance?

Along with everyday living costs, you may also need to budget for big ticket items like buying a new car every few years and enjoying some travel.

Understanding your current financial position

A good starting point is understanding your current financial position. That means adding up all your assets including your superannuation and then subtracting the total value of any debts you owe (your liabilities). The figure that’s left is your capital and this is what you could invest to support what will hopefully be a long and rewarding retirement.

Cost your dream - budgeting for living expenses in retirement

The next step to maintaining your retirement lifestyle is drafting a household budget. This will give you a firm idea of how much annual income you need to support your preferred lifestyle. 

Bear in mind, as a senior you may be eligible for concessions and discounts on a range of regular expenses if you hold a Seniors Card or if you receive a full or part age pension.

Are you afraid you’ll never be able to retire? Despite the news headlines, a comfortable retirement might not need a balance of $1 million. You could retire with less.

If it turns out there is a big gap between how much money you need for your retirement lifestyle and how much you actually have, there are a number of options, or a combination of steps, you could consider to make it work.

These include: 

  • earning more
  • spending less
  • saving more
  • investing in growth assets

Your adviser can give you a clearer idea of the steps you could take to achieve your retirement dream.

A comfortable lifestyle means different things to different people. Use our calculator to learn more about how much the retirement lifestyle you have in mind might cost.


Be mindful of your health

While your health may influence when you retire and your life expectancy, it can also have a major impact on your finances in retirement. 

As you age, you may find medical bills comprise a growing part of your household expenses. This is definitely something to consider when planning your retirement living costs.

Sources of income in retirement

Retirees can tap into a range of different income sources and it’s important to explore each option. Let’s take a look at some of the key types of income.

Returning to work for extra money

One option to give your retirement income a boost, is returning to work on a part-time or casual basis or even doing some consulting or interim work. The added plus here is that more money coming in means the less you have to rely on your super savings, so it’s a great way to make your superannuation stretch a little further.

Consider whether returning to work will impact your retirement plans and, more importantly, any age pension payments you may receive.

Your super

After years of growing your superannuation savings during your working years, retirement is the time when super really comes into its own.

You can access your super once you reach preservation age and retire. Otherwise, you can access your super from age 65, even if you haven’t retired. It can be received tax free once you turn 60 but there are some great tax concessions between preservation age and 60.

The way you access your super is important. That’s because super is generally tax-friendly and while you may want to take a lump sum out of super to invest elsewhere, you could be transferring your capital from a low tax environment (your super account) to a fully taxable environment. 

Purchasing an income stream

Rather than take your super as a lump sum, you can also receive the money as a super income stream – often called an account-based pension.

This means you receive a series of regular payments from your super fund and in this sense, it can be just like receiving your regular wage or salary. This may make budgeting easier and you may still enjoy the benefits of tax concessions that apply to superannuation, including tax free payments once you turn 60.

A financial adviser can help you decide if a super income stream is right for your objectives, financial situation, and needs.

Your other investments

Along with super, you may have other investments to draw on in retirement. It is important that you are comfortable with the level of risk involved in each investment as it's very difficult to replace lost capital in retirement.

Nonetheless, you could expect to be in retirement for many years – possibly decades, and it could make good financial sense to have part of your portfolio invested in growth assets like shares, property and/or managed funds with underlying growth assets.

A long life makes growth assets worthwhile

When we first retire at age 60 or 65, it can be tempting to opt for safe investments like term deposits. However, at age 60 many Australians can expect to live another 25 or 30 years and some exposure to growth assets like shares may be necessary for your money to last the distance.

The trouble is, growth assets don’t always deliver steady returns. Asset markets can fall and this may mean taking a hit to your capital.

Determining the exact mix of investments in retirement can be a juggling act – more so because our needs and lifestyle change as we get older, calling for fine-tuning over time. It’s an area where good financial advice can make a significant difference.

Your home

Along with super savings, your home is likely to be one of your most valuable assets and there are ways to access home equity in retirement. 

One option is by downsizing – this involves selling your home and moving to a cheaper property and using the remaining profit from the sale as funds to live on. Take a look at downsizing for the pros and cons of this strategy.  

A second option is a reverse mortgage. This is a financial product that works like a regular mortgage but in reverse. It’s basically a loan secured by your home. But instead of you making payments, the lender pays you a lump sum or you may be able to draw regular payments. No repayments are necessary until you sell up or pass away, though the loan does start accruing interest from day one. 

A reverse mortgage may be an option for retirees who are asset rich/cash poor, however it will impact the value of your estate, so it is something worth discussing with your family and adviser. 

Did you know that you could consider investing the proceeds of the sale of your family home to your super – depending on your age and circumstances – as a downsizer contribution?

Helping the kids and grandkids

It’s perfectly natural that you want to give your adult children and grandchildren a financial helping hand. But don’t risk your own financial security in the process.

While gifting some of your assets or retirement savings could help your family financially, bear in mind, could also impact your age pension.

Good financial advice can be a great investment for retirees

Planning for and managing the financial aspects of retirement can seem complicated and it is an area where good financial advice can make a difference. 

Decisions you make early on can set you up for a retirement free from concerns over money matters. 

Speak to your financial adviser for help deciding the sort of retirement you can comfortably afford, how to invest for your needs, and the best way to put your superannuation savings to work.

Next: Super and retirement calculator

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Things you should know

This information is current as at 1 July 2023.

This information has been prepared without taking account of your objectives, financial situation or needs. Because of this you should, before acting on this information, consider its appropriateness, having regard to your objectives, financial situation and needs. 

This information provides an overview or summary only and it should not be considered a comprehensive statement on any matter or relied upon as such.

Superannuation is a long-term investment. The government has placed restrictions on when you can access your preserved benefits. The Government has set caps on the amount of money you can add to superannuation each year on a concessionally taxed basis. In addition, the government has set a non-concessional contributions cap. For more detail, speak with a financial adviser or visit the ATO website.

The taxation position described is a general statement and should only be used as a guide. It has not been prepared by a registered tax agent under the Tax Agent Services Act 2009. It does not constitute tax advice and is based on current tax laws and our interpretation.  Your individual situation may differ and you should seek independent professional tax advice from a registered tax agent about any liabilities, obligations or claim entitlements that arise, or could arise, under a taxation law.