The new retirement rule of thumb you need to know


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Budgeting is hard at any stage of life, not least retirement.

The good news is that by retirement, the investing side of the equation has - hopefully - been largely taken care of. The main job now is to understand how much you can responsibly take out each year, and stick to it.

A group of Australian actuaries has done some heavy lifting here, devising a three-part 'rule of thumb' for retirees to work out how much to draw down their super each year.


It works like this: draw down a baseline rate, as a percentage, that is the first digit of your age, and 2% if your account balance is between $250,000 and $500,000. This is subject to meeting the statutory minimum drawdown rule.

For instance, a retiree aged 60-69 with a super balance of 350,000 would draw down 8% of their savings - 6% for the decimal age plus another 2%. The annual drawdown would therefore be $28,000 (8% of $350,000).

"Many retirees draw a bare minimum from their account-based pensions, or their savings, after they stop work," says Actuaries Institute president Nicolette Rubinsztein.

"They can't afford to pay for professional advice from a planner, and they live frugal lives because they fear outliving their savings. But the 'rule of thumb' is simple and accurate and takes into consideration a retiree's asset base and age."


The rule of thumb takes much of the guesswork out of retirement spending.

"It is very hard for retirees, who are generally risk averse, to work out how much of their savings they should live off at any point in time," says co-author John De Ravin.

"The federal government has encouraged the industry to develop better products to help ensure retirees don't outlive their spending.

"But that's still a way off. In the meantime, we've taken a complicated set of equations and scenarios, and worked out what is a simple guideline that works."

The rule of thumb doesn't mean those nearing retirement age should hang up their working boots altogether, at least initially.

Marshall Brentnall, director and financial adviser at Evalesco, says people are often anxious about nominating a single retirement date.

"It is also riskier. By easing clients into retirement it lessens the impact that a fall in investment markets could have, a risk commonly known as sequencing risk."

Brentnall also recommends "gradually provisioning for up to two years of income requirements in liquid and secure strategies such as cash and term deposits in the lead up to retirement, before moving to three years when in retirement".

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David Thornton was a journalist at Money from September 2019 to November 2021. He previously worked at Your Money, covering market news as producer of Trading Day Live. Before that, he covered business and finance news at The Constant Investor. David holds a Masters of International Relations from the University of Melbourne.
eddie eagle
December 1, 2019 8.05pm

good article. If a super balance is above $500K then what extra percentage above your age first number applies?

December 24, 2019 4.37pm

Exactly Eddie Eagle - article is a bit brief to say the least!

Nicholas From Sydney
December 28, 2019 11.46pm

Is the equation really practical or real life? Can't imagine someone in their 80's (health concerns aside) needing to spend 33% more than someone in their 60's probably recently retired and spending more on activities such as travel

Super Sal
December 29, 2019 4.25pm

Is this article available in greater depth in an issue of Money magazine? If so, which issue please?

Money Team
January 30, 2020 11.03am

Hi Sal,

Thanks for your question. This article was written for our website and did not appear in Money magazine.

- Money team

Kerri Moore
January 28, 2020 8.36am

I have the same questions as printed where are the reply so please

Nicola Brown
December 5, 2020 10.54am

Here is the Actuaries Institute "rule of thumb"