Tips to help your super last longer

Whether it’s earning more, spending less, choosing a product with guaranteed lifetime income, or taking on more investment risk, making your retirement savings stretch as far as possible can be done with some simple changes.

12 tips for stretching your super dollars

1. Choose an investment option with more growth potential 

A simple way to help make your super last longer is to change your investment strategy.

Selecting a less conservative investment option means allocating more of your account balance to growth-oriented assets and less to defensive assets (such as cash and fixed interest).

Investing more of your savings in growth assets (such as shares and property) could help boost your super savings as these assets generally provide higher average returns in the long run.

2. Review your budget

An important step in ensuring your retirement savings last the distance is to carefully review your household budget to ensure you’re spending wisely.

Simple changes like checking whether your health, car and home insurance are still set at appropriate amounts and increasing your policy excess can help reduce your premiums.

Consider eliminating recurring expenses you aren’t using, such as gym membership, streaming services and magazine subscriptions.

Regular small expenses can add up to a lot over the course of a year, and this money can be redirected to other, more essential – or pleasurable – retirement expenses.

Trimming your budget means withdrawing less from your super savings, increasing the longevity of your nest egg.

3. Recheck your Age Pension eligibility

If you’re worried about running out of super, it may be time to recheck your eligibility for the Age Pension.

If your income or assets were above the Age Pension means test thresholds when you retired, don’t assume you’re still not entitled to a payment. The combination of regular increases to means-test thresholds and spending down your savings or selling assets means you could be eligible.

The sooner you apply after your savings fall below the limit to receive the Age Pension, the better, because you won’t receive back-pay for any period when you were entitled to a payment but hadn’t lodged your application.

A few dollars from a fortnightly pension payment is not only a welcome source of extra income but also makes you eligible for a Pensioner Concession Card. These cards give you access to valuable discounts and concessions, including cheaper medicines under the Pharmaceutical Benefits Scheme (PBS) and potential savings on public transport, power bills, council rates and more.

4. Add lifetime income to the mix

Using some of your super to invest in a lifetime income stream not only means you receive payments for life, but could also increase your Age Pension or make you eligible for it when you weren’t before.

You can choose between products that provide a guaranteed income indexed to inflation or a variable income linked to investment market performance.

The potential to improve your Age Pension comes from favourable Centrelink means testing for these products.

5. Start using a bucket strategy

Once you retire and begin drawing income from your super, you need to balance competing requirements. You need both capital growth to ensure your savings last the distance, and access to liquid assets for regular withdrawals.

One way to stretch your savings a bit further in an account-based pension is to use a bucket strategy that establishes different pools (or buckets) of money with different objectives and different investment strategies.

Your short-term bucket contains liquid investments (such as cash and term deposits) for regular pension payments, while the medium-term bucket aims for some capital growth to top up the short-term bucket.

The long-term bucket is invested to create long-term capital growth and reduce the risk that your retirement savings will run out.

6. Take on some part-time work

Deciding to retire no longer means you never want to work again. Many people take some time off before deciding to return to the workforce in a different way – or even in a different industry.

Although full-time work is an option, most retirees find part-time or casual work – or even consulting or project work – a more palatable option if they want more retirement income.

With extra money coming in, there is less reliance on your existing savings to pay for everything, which can stretch your super a little further. Working even a day a week opens up new options for managing and growing your super later in life.

7. Downsize your house and upsize your super pot

If you’re worried about a lack of retirement income, consider using your other resources, such as your home. For most Aussies, their home is one of their biggest asset and the equity they have built up in it can be a valuable source of additional income.

One option is to downsize by selling your home and moving to a cheaper property. In some cases, moving to a smaller or less expensive home can free up considerable capital for generating a new source of retirement income.

Before deciding to downsize, don’t forget to check how much you are likely to end up with, as there are transaction fees and taxes to pay whenever you buy and sell property.

Selling your home could also allow you to make a downsizer contribution of up to $300,000 ($600,000 for a couple) into your super account. There is no upper age limit for downsizer contributions; if you qualify, this could be a good way to get more money into the tax-efficient super system.

If downsizing doesn’t appeal, you still have options. You could rent out a room or take out a reverse mortgage.

8. Consider the Home Equity Access Scheme or a reverse mortgage

Reverse mortgages are financial products offered by banks or other financial lenders and work like regular mortgages, but in reverse.

Instead of making payments, you receive either a lump sum or regular payments from the lender. Repayments are not required until you sell or pass away.

The Home Equity Access Scheme (HEAS) is a reverse mortgage offered by the federal government. It can provide a useful tax-free boost to your retirement income with payments available to both eligible pensioners and self-funded retirees.

The HEAS provides non-taxable fortnightly payments (or a lump sum) from Services Australia or the Department of Veterans’ Affairs (DVA) secured by a loan against your home. The HEAS has a very low interest rate compared with a commercial reverse mortgage, but the maximum payment available may also be lower.

9. Leave a smaller inheritance

Many retirees are keen to leave a financial legacy for their children, grandchildren or other family members. Some want to leave something for their favourite charity.

Although this is understandable, when you’re worried about whether your retirement savings will last the distance, reducing the amount you plan to leave your beneficiaries could be a simple way to stretch your dollars.

Many children would prefer their parents enjoy their retirement years rather than going without to leave a substantial amount behind for their beneficiaries.

While leaving less in your estate may be a tough decision, it can be a simple way to ensure your retirement savings last longer.

10. Apply for a Commonwealth Seniors Health Card

If you’re 67 or more and not receiving the Age Pension, you could be eligible for the Commonwealth Seniors Health Card (CSHC) issued by Services Australia.

Benefits for cardholders include cheaper prescription (PBS) medicines, bulk-billed doctor visits (at your doctor’s discretion) and access to the Extended Medicare Safety Net – Concessional benefit.

Depending on where you live, you can also access state and local government discounts such as concessions on electricity and gas bills, property and water rates, healthcare costs and public transport fares.

The maximum yearly income threshold for the CSHC is more than $100,000 for singles and more than $150,000 for couples, and there is no assets test. 

11. Grab a state-based Seniors Card

If you’re 60 or older, you may also be eligible for a state-based concession card offering valuable discounts on your regular expenses.

Each state and territory has a free Seniors Card scheme, and some have reciprocal arrangements when using your card in other states.

Seniors Cards provide a variety of concessions on public transport fares and shopping discounts with participating businesses. 

In most states and territories, anyone over age 60 and working less than a set number of hours per week in paid employment is eligible for a Seniors Card, although eligibility criteria and benefits vary.

12. Check your super fund’s performance and fees 

Sub-par performance and high fees can eat into your balance and leave you with less to live on. Regularly checking how your fund compares is important, but it is a task that many retirees overlook, particularly after starting a pension with their super savings.

Account-based pensions and accumulation accounts can be moved to another fund if you find a better deal, but if you’ve purchased a lifetime income stream, you’re usually locked in.

How long should your super last?

If you’re worried about your retirement savings running out, it’s a good idea to explore how many years in retirement you need to fund.

A good place to check out your possible lifespan is the lifetime estimator calculator. This online tool will give you some idea of how many years you may need to stretch your existing retirement savings.