Why thousands of retirees are better off with less super

How much super do Australians really need to retire? It might be less than you think.

Having a good understanding of Australia's complicated retirement income system can go a long way to easing the stress over whether you have saved enough money to see you comfortably through your retirement.

Unfortunately, for most middle-income Australians, there isn't enough affordable financial planning advice out there to guide retirees through the maze.

Independent financial adviser Nick Bruining says: "One of the big knowledge chasms for many is how the age pension system works hand-in-glove with our savings to generate a truly surprising result."

He's passionate about this area and has just written a book on the topic, appropriately titled Don't Panic: why you can retire with less than you think.

It's aimed at people who are attempting to navigate the system alone.

A co-founder of Netplan.com.au, Bruining is a director and board member of the Certified Independent Financial Advisers Association.

Its members charge a flat fee and take no commissions or volume-based payments, or any other benefits or remuneration that can influence advice.

He offers the following example to show that you can achieve a comfortable lifestyle and set all the angst aside.

How much money do you really need to retire comfortably

"Let's take a typical homeowning couple, with a relatively modest amount in savings. We'll use a figure of about $460,000, which, it will soon become apparent, is the current sweet spot for maxing out the retirement income system.

"The Association of Superannuation Funds Australia (ASFA) estimates a couple's combined retirement expenses sit somewhere between $54,240 for a modest lifestyle and $76,505 for a comfortable one," says Bruining.

"While that will increase each year with inflation, at some point in the future as you age, you won't be spending as much as you used to." He says spending typically declines by up to 30% as you get older.

"Let's assume that most of the $460,000 is parked in super and you're now able to convert the whole lot into an entirely tax-free, income-paying investment called an account-based pension.

How account-based pensions and the age pension can work together

"Assuming you're both at least 67 years old, the only rule that you need to obey is that you must withdraw 5% of the account balance each year before June 30. You can take out more if you want to as a lump sum withdrawal or regular payment amounts, all of it completely tax free. In fact, if it's all set up and done properly, you won't need to file a tax return ever again," says Bruining.

He says you can also stick to a relatively safe conservative investment portfolio, such as a capital stable investment option that allows you to sleep soundly at night.

"The $460,000 is set up to pay the minimum 5% a year and translates to $884.62 a fortnight. Most account-based pension funds will allow you to select fortnightly payments if you like."

The income from your super amounts to $23,000 for the year, while the maximum combined age pension is $1777 - or $46,202 for the year, giving you an annual income of $69,202.

It's the sweet spot where you get the maximum age pension being supplemented by your super account-based pension payments.

Why $460,000 can be the age pension 'sweet spot'

"The bottom line with our example of $460,000 in savings is that there won't be enough deemed income to trigger the Centrelink income test threshold of $380 a fortnight," he says.

"The current combined threshold for a couple is $481,500 in assessable assets. We used the 'scrap' value of home contents and personal effects that Centrelink uses, attaching a value of $10,000 on those fixed assets and a private second-hand sale value on the car of $10,500.

"Our world class system works on the underlying principle that if you have the means to either fully or partially fund your own retirement, you're compelled to do so. Through the application of an asset and an income means test, the well-off miss out.

"If you're lucky to have inherited a $7 million beach shack overlooking the Pacific Ocean in some exotic bay in addition to your family home, don't expect the pension system to pay you anything. That said, the system is surprisingly generous.

"Your home, no matter how much it's worth, is completely exempt from Centrelink's means test system. It needs to be on a block of land less than two hectares, but other rules might apply if you're on a larger block."

How Centrelink asset and income tests really work

A couple can still get a part-pension including the valuable Pensioner Concession Card (see above) with assets up to $1.0745 million under the assets test. Under the income test, combined income could be up to $117,884 a year.

Bruining gets his clients to do a detailed budget in the early days to know what money is required and to work to that.

"A mistake some people make is that they pluck a number out of the air and that can create issues. You might take more income than you need and that could mess up your tax and Centrelink when you didn't need to.

"If you underestimate your income needs, that may force you to sell assets at an inappropriate time. You might be crystallising losses when you didn't need to."

He says understanding how Centrelink works hand in glove with your savings is essential, but most planners don't cover that area.

"It's so complicated, many planners are more interested in managing investments and leave Centrelink for the clients to sort out, which is arguably the most complicated part of it.

Why PRODA access matters when choosing a financial adviser

"There's one question I'd ask any planner you are thinking of using 'Do you have access to PRODA?' It's the professional data access system, the portal used by professionals to interact with Services Australia, including Centrelink. If you get a blank stare, to me that's a problem."

He says the key is to get a solid grounding on how Centrelink interacts with your savings but it is mostly left to you to figure it out yourself.

"Did you know installing a lift in your home to make it retirement ready might boost your super. One of the big ones is putting money into your home, you're effectively moving assets from an area where Centrelink might look, to where they don't look. That can be improving the home and getting it retirement ready.

"At the same time, you are potentially improving its value. You're in effect improving your estate for the kids, so there are lots of wins."

The pros and cons of SMSFs approaching retirement

Bruining says he sees a lot of people that have discovered their self-managed super fund (SMSF) wasn't everything it was made out to be.

"They aren't actually better off. It's costing them more and it's complicated. Inevitably, you have a dominant member of the fund, usually the husband, and if suddenly he has a stroke, the wife has no idea how it works. If you're running an SMSF in the lead-up to retirement, think long and hard about how long you want to do it. We see a lot of people in their seventies who have had enough, and say 'put me back into an industry super fund'.

"We do everything we can in those five years leading up to retirement to clear the debt. That's where things like a transition-to-retirement account-based pension is a very effective tool, you can take 10% of your super balance and whack it off the mortgage.

"Once you get to 60, super withdrawals are completely tax free. Once that's done, if you're still working, you've got the cashflow freed up to inject it back into super, it's very tax effective."

How to reduce risk and simplify super in retirement

He also advises people to check their life insurance and establish whether there is any need for it.

If you paid off the mortgage, cleared all your debts, your children are independent and there's enough to take care of your spouse, should you be paying $4000 a year or more for insurance you don't need?

"Look at your super in terms of risk profile. It's a stage in life where we like to see people strategically back off from the risk of the early years of retirement. If you've had it in high growth and had the benefit of it, it's time to lower the risk.

"Retirees like to keep things pretty simple. They like to know the money's there and going to be coming in and not lose sleep if there's a crash."

He also recommends having two years' worth of expenses parked in your fund's cash option for expenses and the rest in the capital stable option to avoid drawing down on when sharemarket fall.

"If you've made a profit, push the profit across to the cash account to top it up. If the market is hit, sit tight, because it will eventually come back."

Where retirees can find age pension help

Marisa Broome, a certified financial planner and the principal of wealthadvice.com.au agrees there isn't enough help for retirees applying for the age pension.

"There aren't many places they can go if they have a modest amount of money. That's what proposed legislation was meant to do, allow the super funds to give more guidance. The legislation has just been sitting there for two years.

"This is probably my criticism of my own profession. Too many of my peers see advice as only an ongoing scenario, whereas there are times you can see clients as a once off, set them up and they won't have to come back to you.

"Or if they do, it might be only every few years, charging them a fee for service.

"They should be able to access advice as a once-off, not as ongoing advice - and be charged a fee for service when and as necessary rather than on an ongoing basis.

"I like the English system where everyone has access to pension retirement advice. They get so many hours with the service, after that, they find advice if needed. But most people get everything sorted out in those first few meetings.

"We need a service like that. We used to have something like that, a financial information service run by Centrelink, but they're limited in what they can do now."

How to navigate the Centrelink pension process

If you've thrown up your hands in despair while attempting to navigate the eligibility requirements for the age pension, it's a good idea to check whether your super fund helps with the Centrelink application process.

Some of our major super funds have partnered with Retirement Essentials, part of SuperEd, to help members access their age pension entitlements.

Director and co-founder of SuperEd, Jeremy Duffield, says the system's complexity is a primary reason why many retirees struggle or miss out on entitlements.

"The Australian age pension system is definitely a complex social security system. I often joke that only in Australia could we invent government rules so complex and confusing."

Frequently it comes down to information overload. People don't understand how the rules are applied to them and are left in the dark when they fail the means test.

The formal application process itself involves answering hundreds of questions and can deter or confound applicants, and the documentation requirements are found to be overwhelming.

And those who are receiving the pension find it difficult to keep up with the frequent annual changes to rates, thresholds and entitlements - the timing of which can seem unexpected.

Duffield says the age pension is crucially important as the foundational pillar of our retirement system. "It currently provides core funding for about seven out of 10 Australian retirees and more than half of retirement income for more than half of older Australians.

"For a couple, the value of the age pension over a lifetime can be well over $1 million in current dollar terms and more than $750,000 for a single. So it's highly valuable. In addition to the age pension, there's the Pensioner Concession Card, which provides valuable benefits."

"Just because you fail once doesn't mean that you won't be eligible in the future. For instance, many people are still working at 67 and may not qualify until they reduce work income. Others may be working but still qualify for the age pension and don't realise it."

"We believe Australians are missing out big time by too often applying late. There's no backpay on the age pension. The key message to help older Australians is: check your entitlements and don't apply late - there's no backpay on the age pension.

"The consolation prize is the Commonwealth seniors health card, which has no assets test and very high-income limits, so the vast majority of people over 67 would qualify for that. We think it's greatly underappreciated, but there are maybe 700,000 to 900,000 people who are missing out on that," says Duffield.

How the pension is calculated 

The stated intention of the age pension is to support the basic living standards of older Australians. The entitlement is based on a means test with two parts: the income test and the assets test.

To be eligible for any age pension payment, you must successfully pass both tests.

The calculation works under a strict rule: whichever test yields the lower rate of the age pension is the one that Centrelink uses to calculate your fortnightly payments.

Income test

The income test assesses income that's generated from various sources:

• Employment: this includes income from part-time, casual or seasonal work.
• Property and business: rental property income, business incomes or profits.
• Other payments: pensions or social security-style benefits received from other authorities.

Centrelink does not assess the actual income you receive from financial assets such as bank accounts, shares, bonds, loans or super. Instead, it 'deems' the income for the test.

The income-free sweet spot is $218 a fortnight for singles and $380 a fortnight for couples combined. Once you exceed these limits, the pension is reduced by 50c for every dollar over the threshold. These limits are tied to the CPI and indexed each July.

The deeming rates as of September 20, 2025, is 0.75% on assets up to $64,200 for singles and $106,200 for couples, then 2.75% on your financial assets over these thresholds.

The assets test

The assets test assesses both financial and non-financial assets (household goods, car). The limits vary depending on whether the individual or couple owns their home.

Assets that count include money in the bank, super, shares, bonds, investment properties and personal assets above certain limits.

What's excluded?

Your home and the first two hectares of land it's located on are exempt from the assets test. The preferential treatment of the home significantly influences retirement outcomes.

The actual income generated by your financial assets is ignored. Only the deemed income is assessed.

As the table below shows, to be eligible for the maximum age pension, your assets must be less than $321,500 for a single homeowner and $481,500 for a couple combined. Non-homeowners get a further $258,000 under the assets test.

Maximum payments for singles and couples

The thresholds for receiving the full age pension are often referred to as the sweet spot. If assets or income exceed these full pension thresholds, the payment starts reducing:
• For income: pension reduces by $0.50 for every $1 earned over the threshold.
• For assets: pension reduces by $3 for every $1000 by which the assets exceed the threshold.

"We find most people start out with a part age pension. Over time, their age pension increases as they spend down their super or stop working," says Duffield.

"I like to say the age pension gets better with age: more people qualify as they stop working and they're eligible for more as their other assets decline, and the age pension keeps increasing with inflation, which can't be said for many things.

Keeping track of entitlements is critical because the Australian government updates the age pension means tests three times a year.

"It's also the responsibility of the pensioner to update their financial information if there are any changes.

"This frequency of change makes it essential to stay informed to ensure you receive all your entitlements. That's one of the reasons Retirement Essentials age pension eligibility checker is so frequently used," says Duffield.

What about the work bonus?

The Australian retirement system provides a specific incentive for pensioners to work, known as the work bonus, which allows them to keep more of their pension.

• Exemption: the first $300 of fortnightly income from employment is completely exempted under the pension income test.
• Income bank: if a pensioner does not use the full $300 fortnightly exemption, the unused amount is accrued in a work bonus income bank.
• Maximum balance: since January 1, 2024, the maximum income bank balance was permanently increased to $11,800 for all eligible age pensioners under the bonus scheme.

Can retirees get help from their super funds?

Duffield says retirees can and should look to their super funds for help, in particular regarding transitioning into retirement and maximising government benefits.

"As more than half of older Australians get more than half their retirement income from the age pension, it's a natural fit for funds to help their members with it as part of their program of retirement services.

"In a survey we did in 2022, 79% of older people said they wanted help with the age pension and 70% said they wanted help from their super fund," he says.

How much do you need to retire?

People are often vague when asked to identify their annual expenses and the income they need to cover it.

Without that basic information it's impossible to draw up a realistic budget and keep track of spending.

It's less of a problem when you're working and have a regular salary coming in. Once that stops, it's a different matter. It's at that point that many retirees start to worry about their savings and whether there's enough to support their lifestyle.

The only way to establish whether you're set up for the retirement of your dreams is to identify all your outgoings.

Then you will be able to establish how much annual income you will need and whether it's sustainable throughout your retirement years. Keep in mind that things you might have spent money on while working may no longer apply once you're out of the workforce.

Where to start

A good starting point is the Association of Superannuation Funds of Australia's (ASFA), which shows the minimum annual expenditure for a comfortable, modest or age pension retirement for couples and singles, homeowners and renters, for those in the 65 to 84 age bracket.

ASFA gives a weekly breakdown of expenses to show how these figures are derived and it's a useful reference when drawing up a budget.

ASFA's September 2025 figures show that the minimum annual expenditure for a comfortable lifestyle in retirement is $54,240pa for homeowner singles and $76,505pa for a homeowner couple.

ASFA also gives the super balances required to generate the income needed for the different groups. For instance, 
the super balance required to achieve a comfortable retirement at age 67 is $690,000 for a homeowner couple and $595,000 for homeowner singles.

If you have missed out on the age pension, don't despair, there's one coveted benefit you may still be eligible for. It's the Commonwealth seniors health card. There are three basic tests: age, residency and income. Crucially, there's no assets test, and the income test it applies is generous with couples earning up to $161,768 a year being eligible for the card.

Eligibility requirements

1. Age: you must be at least 67 years old.
2. Residency: you must meet residence requirements and generally not be receiving a payment from Centrelink or the Department of Veterans' Affairs.
3. Income test: your annual adjusted taxable income must be less than the following thresholds: $101,105 for singles and $161,768 for couples. The limit is even higher for couples separated by illness at $202,210.

The income assessment includes your taxable income including foreign income and only a deemed amount from your account-based pensions. Significantly, other financial assets, such as shares, money in the bank and super in accumulation phase are completely exempt from this test.

It it worth getting?

It is considered well worth the effort. It is conservatively estimated that the discounts might add up to $2000-$3000 a year, says SuperEd's Jeremy Duffield.

Top benefits include:

• Cheaper medical costs. Access to cheaper prescription medicine via the pharmaceutical benefits scheme and larger refunds once the Medicare safety net is reached.
• Healthcare subsidies. Free or lower rates on other healthcare expenses, such as ambulance services, eye check-ups, hearing and dental care.
• State-based discounts. Discounts on household expenses such as water and property rates in some States (for example, up to 50% rebate on water charges in WA).
• Energy and transport. Discounts on electricity and gas bills (seniors energy rebates) and metropolitan/regional travel discounts.

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