Step by step guide to planning for retirement

Super and investments 101 | Date Posted: 14 August 2023


Retirement is your time to enjoy what truly matters – you’ll have more time to spend with loved ones, focus on hobbies, travel or staying active and healthy. It’s important to plan early for the next chapter in your life, so you understand your needs and goals, and can take steps to make the retirement of your dreams a reality.

Read on for a step by step guide of what to consider when planning for your dream retirement.

1. Identify your goals and lifestyle in retirement

 Have a think about how you’ll spend your time in retirement, and what your expenses will be. Are there things you’ll no longer need, such as a large house, a second car or daily travel expenses? Will you take up an expensive hobby, support loved ones financially or want to enjoy regular trips away? What about your daily essentials and staying socially engaged?

2. Estimate how much money you'll need

Estimate the amount of income you’ll need to maintain your desired lifestyle; then develop a strategy to achieve this income goal. This will help you determine whether you’re on track or need to make changes to your current or future lifestyle. It’s important to consider all your income sources, not just super. Depending on your situation, you may have other investment such as shares, have savings or be eligible for a (part) Age Pension.
Handy tip: According to ASFA, for a comfortable retirement, singles need a budget of $50,004 and couples $70,482 per year*. Your definition of a comfortable lifestyle may be different, so it's important to understand how much you’ll need for the things you want.

3. Consider what age you want to retire at

You can choose to stop working at any age. Your retirement age can differ from your preservation age (the age at which you can access your super) and the Age Pension age (the age at which you can start receiving the Age Pension – subject to meeting the eligibility criteria). Knowing how much time you’ll have left will help with your retirement plan.
Handy tip: if you have a partner, it’s also important to understand when they can or want to retire. You can also check out the Super contribution splitting strategies for couples factsheet, and see if this could benefit you. 

4. Know when you can access your super

Generally, you can access your super when you turn age 60 and retire, or slightly earlier if you were born before 1 July 1964 (in some circumstances, such as if you’re totally and permanently disabled, have a life-threatening illness or going through financial hardship, you can access your super earlier). 

5. Understand the role of the Age Pension

Despite an increased reliance on superannuation to fund people’s retirement, many Australian retirees continue to supplement their retirement income with at least a part government Age Pension. To qualify for the Age Pension you must pass an income test and an assets test. Even if you only qualify for a part pension, this can make a difference to your retirement lifestyle, as you’ll automatically qualify for a pension concession card and associated discounts. For more information about this, read our Super savings and the government Age Pension factsheet.

6. Work out what you need

Super is only one source of income. Depending on your personal situation, you may be eligible for a (part) Age Pension, have savings or other investments. If you own your home, it may be an opportunity to downsize to free up some cash. If you’re renting, you may be eligible for an extra payment if you rent and get payments from Centrelink, like the Age Pension^.
Handy tip: Eligible home owners aged 55 and over can contribute up to $300,000 into their super from the proceeds of selling their main home, without it counting towards any contribution caps. Read more in the Downsizer contribution measure factsheet.

7. Keep your money working for you

When you retire (and have reached preservation age), you can choose to take your super as a lump sum, or open an account-based pension (pension); or a mix of the two. A pension is a popular way for Australians to manage their retirement savings, because investing your super in a pension rather than taking it as a lump sum (or keeping it in the super phase!) can make your retirement savings go further. 

You can invest in the same assets, such as cash, shares or property, inside or outside a pension. The difference is that the government provides tax savings on investments inside a pension as an incentive to convert your super into a regular income stream to support you in retirement, rather than taking it as a lump sum. The lower tax rates mean the same investment in a pension will go further than if invested outside a pension.

8. Make the most of your super now

There are a number of things you can do now to get your super in shape as you approach retirement. 

  • Maximise your contributions to boost your balance. One of the great benefits of super is that earnings are taxed at a low rate. So, unlike other types of investments, any earnings you make on your super will be taxed at a maximum of 15% instead of your marginal tax rate. For example, if you invest your money in the share market, your earnings could be taxed at a rate of up to 47% (including Medicare levy), depending on your income. But any investment earnings in super are only taxed at a maximum of 15% (catch being, you can’t access this until you reach preservation age). And remember, by boosting your super now, you’ll benefit from the snowball effect of compound interest.

  • Consider your risk appetite. When investing your super, you need to consider balancing long-term financial goals against the risk of losing money, especially over the shorter-term. The general rule is that as the potential for a higher return increases, the risk of loss also becomes greater. This is known as the 'risk/return relationship’. When choosing where to invest your super you need to strike a balance between the risk you’re comfortable with and the rate of return you need to achieve your retirement goal. As you get older and closer to retirement, it may be a good idea to review your investment mix to ensure it meets your changing needs. You can read more about the risk level of our different investment options in this article

    Did you know? If you’re invested in the Lifecycle Investment Strategy, you’ll gradually reduce your exposure to growth assets such as shares, and increase your exposure to defensive assets, such as fixed income and enhanced cash, from age 51. This aims to provide less volatile investment returns as you get older.

  • Combine your super. If you have multiple super accounts you could be paying fees and insurance premiums for each one. It can really add up. According to the Australian Taxation Office (ATO) as at 30 June 2022, around three million people had two or more super accounts. You can check MyGov to see if you have other accounts and combine these, or complete a rollover form. Find out more on the Combine your super page.

  • Does your insurance still meet your needs? Insurance is not set and forget. It’s important to regularly check your cover to see if it’s still appropriate for your needs, especially if your circumstances have changed now you’re closer to retirement. 

    If you have insurance through your Mine Super account, it’s important to know that the level of cover changes as you age. Basic Insurance Cover (including Death and Terminal Illness (DTI) and Total and Permanent Disablement (TPD) cover) stops when members turn 65. You can opt to convert this to Voluntary Cover before you turn 65. Voluntary DTI and TPD stops when you turn 70. Standard Income Protection also stops when you reach age 70. You can read more about this in our Insurance Guide.

  • Nominate your beneficiaries and estate planning. Your estate is everything you own plus your debts. By carefully planning your estate you can decide who’ll receive your assets, minimise family feuds and manage your tax. The more complicated your financial affairs, the more important this is. Did you know? Some assets, such as your super and insurance, don’t automatically form part of your estate and need to be dealt with separately. Find out more about successfully planning your estate.

    Nominating a beneficiary can help make sure your super benefit, including your account balance and any insurance cover you’re entitled to, goes where you want it to in the event that you were to pass away. You can make a non binding, or a binding nomination, and you can only nominate certain people as your dependants. Find out more about the rules in our factsheet. 

Getting help

Not sure how to get started? We offer members a free, simple super health check over the phone to cover the basics. If you’re after more complex advice, based on your individual situation, Mine Super Financial Advice can work with you to develop a plan that will meet your goals. Mine Super members are entitled to a complimentary appointment. And did you know? Advice on how your account is invested is at no extra cost, but there are fees associated with providing personal financial advice. During your appointment your adviser will discuss the fees and how you’d like to proceed.

Meet the team or request an appointment with Mine Super Financial Advice.