12 · Retirement and retirement planning
The question is not “is $600,000 a lot?” but “how long does $600,000 last at the income we want?” Those are different questions, and only the second is answerable.
Retirement planning in Australia is unusually knowable, because the machinery is public. Super has rules, the Age Pension has a formula, and the tax treatment after sixty is simple. What makes it feel impenetrable is that the pieces are held by different institutions and nobody puts them on one page. The Retirement tab does exactly that, using the figures already on your balance sheet.
The three ages that govern everything
| Age | What happens | Why it matters |
|---|---|---|
| 60 — preservation age | Super becomes accessible on retirement, and pension income is tax-free | Nearly every “can I stop work at…” question turns on this |
| 65 | Access becomes unconditional, whether or not you have retired | You no longer need to meet a condition of release |
| 67 — Age Pension age | Age Pension may become payable, subject to the tests | For anyone born from 1957 |
Enter dates of birth on the Family details tab and the app marks the year each age arrives as it walks the projected balance sheet forward.
What the Retirement tab models
Living on the lump sum
Tick retired for a person and they draw a pension from their own super balance. Earnings are used first, then the drawing, year after year. If someone retires before preservation age, the app grows the balance untouched and starts drawings the year access arrives. Pension income is modelled tax-free, which is correct from sixty.
Part-time work alongside a pension
Fully supported, and it changes the arithmetic more than most people expect. Wages are taxed normally, employer super keeps flowing into the very balance being drawn from, and the pension remains tax-free — so the balance falls more slowly from both directions at once. Set an FTE and compare the “lasts until” year with and without it. “Can I afford to go part-time at sixty-two?” is answerable in about a minute.
Defined benefit pensions
The classic public-sector, state-scheme or corporate pension: tax-free, indexed to inflation, paid for life. It counts as income without touching any super balance, and it has no lump-sum value on the balance sheet because there is no account to draw down. On the owner’s death a surviving spouse receives a set percentage — the reversion — for their lifetime.
Minimum drawdown rates
An account-based pension must pay out at least an age-based percentage each year, rising with age, and the app draws the larger of your target and the minimum. The rates are editable, like the tax table.
The minimum is a withdrawal rule, not a spending rule. That money must leave the tax-free pension account. It does not have to leave your life. Set a target below the age-based minimum, watch the app draw the minimum instead, and give the excess a Savings envelope.
The retirement spending smile
Most people do not spend the same amount every year of retirement. Research in Australia and overseas finds real spending typically eases through the active years, flattens, then lifts late as health and care costs arrive — the “smile”. It is off by default, because it is a population average and your household may look nothing like it. Turning it on generally makes the money last longer, which is exactly why it should be treated as a scenario rather than an assumption.
The Age Pension, and the fact that surprises everyone
The app estimates the Age Pension under both tests and, as Services Australia does, pays whichever gives less. Your principal home is exempt; everything else on the balance sheet counts, less any debt not secured on the home. Above the free area the pension tapers at $3 per fortnight for every $1,000 of assets.
The pension rises as your savings fall. It is calculated from what remains, so spending the lump sum lifts the pension underneath it — which is why a retiree’s income holds up far better than a lump-sum-only projection suggests. This is the most reassuring and least understood fact in Australian retirement. Switch the estimate on and read the year-by-year panel: assessable assets falling, the pension climbing to meet them.
Under the income test, financial assets are deemed rather than counted at their real return, wages are exempt up to the Work Bonus, and defined benefit income counts less its deduction — while account-based pension drawings are not counted as income at all. That last point catches people out.
Know the difference between income and cash flow. Much of what an account-based pension pays is simply your own capital coming back, which is why the income test does not count it while it does count rent. Confusing the two leads people to chase income they do not need and to misjudge their entitlement. Test it: add rent under Other income and watch the pension fall, then increase your drawdown by the same amount and watch it not.
Not modelled: rent and business income under the income test, the Work Bonus income bank, gifting and deprivation, granny flats, rent assistance, transitional rates and residency requirements. It is an estimate, never an entitlement — Services Australia decides the real figure, and thresholds move twice a year.
The Commonwealth Seniors Health Card
A separate entitlement from the Age Pension, with its own income test and no assets test — which is why many self-funded retirees who receive no pension at all still qualify. It brings cheaper medicines, a lower Medicare safety net threshold, and various state concessions on rates, utilities and transport. It is one of the most commonly missed entitlements in Australian retirement, and the app will estimate eligibility if you ask it to.
Five decisions worth making deliberately
- Decide how long you are planning for. Most people quietly plan for about eighty. For a couple aged sixty-five today, the odds that at least one of them sees ninety are far higher than either expects — and a plan that runs out at eighty-five is not a plan, it is a hope. Set the horizon to reach age 95 for the younger of you and read the drawdown again. Planning for a long life is not the same as expecting one; it is buying certainty about the years you probably will see.
- Build in a cushion on purpose. Leave a deliberate gap between what you expect to receive and what you plan to spend. A surplus in retirement is not money going to waste — it is the anxiety insurance that lets people actually enjoy what they have.
- Treat retirement as a dial, not a switch. Two days a week, consulting, a board seat, seasonal work.
- Review the insurances. Cover taken out for a mortgage and dependent children may no longer be needed; cover inside super often ends at a certain age without anyone being told.
- Find out what you actually have, in one place. Many people approach sixty without a single view of both super balances, the mortgage, and what they spend. The number that matters is not any one of them; it is the relationship between them.
Know when to stop reading and start asking. This handbook explains mechanics. It cannot tell you whether a strategy suits you. Transition-to-retirement pensions, contribution strategies, estate planning, insurance inside super and anything involving a self-managed fund are conversations for a licensed financial adviser or registered tax agent. Services Australia’s Financial Information Service is free, independent and rarely mentioned.