Retirement Planning Guide — How to Prepare for Retirement in Australia

Retirement planning is about ensuring you have enough income to live the life you want when you stop working. In Australia, the retirement income system has three pillars:

• The Age Pension — a government safety net for those who meet age and means test requirements
• Superannuation — compulsory employer contributions (12% of wages as of 1 July 2025 — the final scheduled increase) invested over your working life
• Voluntary savings — additional investments, property, and other assets

Most Australians rely primarily on super and the Age Pension. The decisions you make about your super — contributions, investment options, insurance, and drawdown strategy — will significantly affect your quality of life in retirement.

The ASFA Retirement Standard (December 2025 quarter) provides benchmarks for retirement income:

These figures assume you own your home outright and qualify for a part Age Pension. They reached all-time highs in 2025, driven by rising electricity, food, and utility costs. If you rent, need to fund aged care, or want to travel extensively, you may need significantly more.

• Key factors that affect how much you need:**
• Whether you own your home
• Your expected lifestyle and spending
• Your health and life expectancy
• Whether you have a partner
• Any debts remaining at retirement
• Whether you qualify for the Age Pension

• In your 20s-30s: Build the foundation**
• Consolidate multiple super accounts to reduce fees
• Check your super fund's investment option — consider a growth or high-growth option for long-term compounding
• Ensure you have appropriate insurance within super
• Start salary sacrificing even small amounts — time is your biggest advantage

• In your 40s: Accelerate contributions**
• Review your super balance against the ASFA benchmarks
• Maximise concessional contributions ($30,000/year cap including employer contributions)
• Consider non-concessional contributions if you have surplus income
• Review your investment mix — still time for growth but start considering risk

• In your 50s: Refine your strategy**
• Get professional advice — the decisions you make now have the biggest impact
• Consider a transition-to-retirement (TTR) strategy
• Model different retirement scenarios — what age can you afford to retire?
• Review your insurance needs — they may have changed
• Start thinking about your Age Pension eligibility

• In your 60s: Execute**
• Finalise your retirement date and income strategy
• Convert super to an account-based pension at the right time
• Optimise your Age Pension entitlement through asset structuring
• Update your estate plan and binding death benefit nominations
• Consider Centrelink financial information service (free)

Salary sacrifice: Contribute pre-tax income to super above the compulsory employer contribution. This reduces your taxable income (contributions are taxed at 15% in super, vs your marginal rate outside). The concessional contributions cap is $30,000/year (2025-26), which includes employer SG contributions plus any salary sacrifice.

Catch-up contributions: If your total super balance was under $500,000 on 30 June of the previous year, you can carry forward unused concessional contribution cap amounts from the previous 5 years. This is particularly useful if you had years with lower income or career breaks.

Non-concessional contributions: You can contribute up to $120,000/year (2025-26) of after-tax money. The bring-forward rule allows up to $360,000 over 3 years if your balance was under $1.76 million. These are not tax-deductible but grow tax-effectively inside super.

Spouse contributions: If your spouse earns under $40,000, you may get a tax offset of up to $540 for making contributions to their super. This also helps equalise super balances between partners.

Downsizer contributions: If you are 55 or older (lowered from 60 in January 2023) and sell a home you have owned for 10+ years, you can contribute up to $300,000 per person ($600,000 for a couple) to super within 90 days of settlement — outside the normal contribution caps and with no work test.

Transition to retirement (TTR): From preservation age (currently 60), you can access a TTR pension from your super while still working. This can be used to supplement reduced work income or to implement tax-effective contribution strategies.

The Age Pension is available from age 67 (for those born after 1 January 1957). Eligibility depends on:

• Assets test — your assets (excluding your home) must be below certain thresholds
• Income test — your assessable income must be below certain thresholds
• Residency — you must be an Australian resident and have lived in Australia for at least 10 years

• As of September 2025, the maximum full Age Pension rate is approximately:
• Single: ~$30,650/year (including Pension Supplement and Energy Supplement)
• Couple (combined): ~$46,200/year (including supplements)

Many retirees receive a part pension — the amount reduces as your income and assets increase above the lower thresholds. Understanding how the means tests work is crucial for structuring your retirement income efficiently.

Important: The Age Pension alone is not enough for a comfortable retirement. It is designed as a safety net, not a full income replacement.

Professional advice is most valuable:

• 5-10 years before retirement — time to implement strategies and maximise your position
• When deciding to retire — drawdown strategies, pension products, Centrelink interaction
• If you have complex assets — property, business interests, SMSF, overseas assets
• If you have a spouse — coordinating two super accounts and optimising jointly
• If you are unsure about the Age Pension — means test optimisation can save thousands

A retirement planning specialist can model different scenarios, optimise your tax position, and help you avoid costly mistakes.

Look for advisers who specialise in retirement planning and have experience with the specific strategies relevant to your situation.