In this guide
- 1. Keeping your super in accumulation phase
- 2. Misunderstanding eligibility for the Age Pension
- 3. Not understanding investment options
- 4. Not doing your super homework
- 5. Not applying for relevant concession cards
- 6. Forgetting to factor in healthcare costs
- 7. Underestimating how long you will live
- 8. The impact of inflation
- 9. Cashing out all your superannuation
- 10. Sequencing risk
- The bottom line
Retirement mistakes can cost people tens of thousands of dollars at a time of life when it’s difficult to make up lost ground.
These 10 common mistakes alone can cost retirees thousands of dollars a year in lost income.
As of June 2024, over 1.5 million member accounts of people aged over 65 were still in accumulation phase, when they could have been in retirement phase and not paying unnecessary tax, according to an analysis of APRA data by Challenger Limited’s head of retirement income Aaron Minney.
And Super Consumers Australia estimates that retirees in poorly performing super products could lose as much as $205,000 over their retirement.
Not all retirement mistakes are this costly, but it’s important to be aware of what could go wrong so you start your retirement journey on the right track.
1. Keeping your super in accumulation phase
As outlined above, not moving your super from accumulation phase into retirement phase as soon as you are eligible means you will be paying 15% tax on earnings in your super account when you could be paying zero.
Challenger estimates there was $302 billion in the 1.54 million member accounts that could potentially be shifted into retirement phase.
“There are more accounts for people over 65 in the accumulation phase than there are in the pension phase,” Minney says.
He stresses that there might be valid reasons why members leave money in an accumulation account and super funds have been doing some research as to why people are not shifting into retirement phase as soon as they are eligible.
“In some cases, they’re finding reasons why people are doing it. Now, in some of those, they’re quite sensible. Someone’s still working, don’t need the income yet, so they just pay the contribution in, almost just defer it, and they know there’s a bit of tax there,” he says. Also people with more than the transfer balance cap of $2 million in super cannot move it all into the retirement phase.
2. Misunderstanding eligibility for the Age Pension
Another mistake some people make when planning for retirement is to misunderstand their eligibility for the Age Pension. While it’s true if you have a decent amount in your super account, you may not be eligible for the full pension, you could still be eligible for a part pension if you have assets below the amounts in the table below at any time during your retirement.
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Even if you are not eligible for any Age Pension when you retire, as you draw down on your assets over time, you may become eligible to receive a part or even a full pension. So don’t assume your Age Pension eligibility is fixed at the point you retire. It’s also important to update Centrelink as your balance decreases so you can get any Age Pension entitlements you might be eligible for.
With any amount of part Age Pension, you will also be eligible for discounted medical expenses, utility bills and transport, which can greatly reduce your costs.
Assets level at which the pension completely cuts out (as at September 2025)
| Your situation | Homeowner | Non-homeowner |
|---|---|---|
| Single | $714,500 | $972,500 |
| A couple, combined | $1,074,000 | $1,332,000 |
| A couple, separated due to illness, combined | $1,267,500 | $1,525,000 |
Source: Services NSW
There is also an income test you must not exceed, but these limits may also be higher than you expected. For example, while the income cut off for a full pension for a couple combined is $380 per fortnight, for a part Age Pension it is $3,934 per fortnight (and $5,095 per fortnight for a couple separated by illness).
For a single retiree, it’s $218 per fortnight for a full Age Pension, and $2,575.40 per fortnight for a part Age Pension.
The amount of Age Pension you are eligible to receive will be the lower amount after applying the assets and income tests.
3. Not understanding investment options
As highlighted above, a report by Super Consumers Australia (SCA) has found that not choosing the right super investment option can cost you thousands of dollars in retirement income.
The report found that 33 out of the 114 retirement options offered to super fund members were delivering much lower returns than their peers relative to their risk profile, with variations in returns having the potential to cost someone with a typical retirement balance of $250,000 up to $205,000 over their retirement.
The SCA is calling on the government to extend the performance test to retirement options for members. Until that happens, you need to do your own due diligence on the retirement product options you are considering.
4. Not doing your super homework
Another report, this time from the Super Members Council, revealed that three-quarters of pre-retirees find retirement products bewildering, and only 16% said it was easy to understand the tax rules.
They calculate that a retiree could miss out on as much as $136,000 during their retirement because of difficulties navigating the system.
While much of the responsibility for a complex system lies with the government, it’s important you take an interest in your super and retirement early on and learn as much as you can about how the system works and your options.
This may not be as onerous as it sounds. Many super funds offer education seminars or webinars for members as they approach retirement and the government’s Moneysmart website has a wealth of information about super and retirement, as we do here at SuperGuide.
5. Not applying for relevant concession cards
Even if you’re not receiving any Age Pension and are ineligible for the Age Pension concession card, there are other seniors’ cards you may be eligible for.
Each state often has its own version of a senior’s card, but there is also the Commonwealth Seniors Health Card (CSHC) for anyone who has reached their age pension eligibility age and met certain criteria, including a generous annual income test.
The CSHC entitles you to cheaper medicines, bulk-billed doctor visits and a larger Medicare refund on medical costs when you reach the Medicare Safety Net.
And you can always ask for a senior’s discount wherever you go. You may or may not get it, but you won’t know until you ask.
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6. Forgetting to factor in healthcare costs
It’s easy to forget that you won’t be as fit as you are at 65 by the time you turn 85. Or even if you are planning for your health to decline as you age, it’s hard to predict how that will unfold. Will you need to adapt your home as your mobility decreases, for example, or will you need other kinds of help in the home?
There are government aged care packages that can accommodate some reduction in mobility and other higher care needs, but changes in how people are assessed for aged care may mean you have to pay a higher co-contribution.
The Association of Superannuation Funds of Australia (ASFA) retirement income standard estimates healthcare costs (which includes health insurance, pharmacy, co-payment and out-of-pocket medical expenses and over-the-counter medicines) increase from 15.8% of weekly expenditure for a 65–84-year-old couple enjoying a comfortable retirement to nearly 20.2% of weekly expenditure once they hit 85.
So, it’s important to keep these costs in mind as you plan for retirement and potentially keep a buffer for any home modifications you may need.
7. Underestimating how long you will live
According to the latest data from the Australian Institute of Health and Welfare (AIHW), a man aged 65 in 2021–23 could expect to live another 20.1 years (to age 85.1), while a woman aged 65 in 2021–23 could expect to live another 22.7 years (to age 87.7). That means most people retiring today at age 65 can expect to live at least another twenty years. But what a lot of people forget is that these numbers are averages; half of this group will live beyond age 85 and some may live to celebrate their century.
For example, the AIHW tables show that if a male did make it to 85 years old in 2021–23, their life expectancy at that point was 91.3 years. For a woman aged 85 in 2021–23, their life expectancy was 92.4 years.
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If you retire at 65, you may need your super and other retirement savings to last for close to thirty years. And if you don’t want to live solely on the Age Pension, you need to put in place contingencies for your super to last as long as you do.
8. The impact of inflation
Inflation has come off the highs reached in 2022, but could be starting to creep back up. The Consumer Price Index rose from 3.6% in September 2025 to 3.8% in October. If it stays above the Reserve Bank’s target band of 2–3% it has real potential to upset retirement plans by eroding the value of money you have worked so hard to save.
According to the ASFA retirement income standard, a couple needed $75,319 to retire comfortably in the June quarter of 2025, compared to the $73,031 per year required to retire comfortably in the September 2024 quarter.
Given rising prices, retirees may need to adjust their income needs and requirements as they age as well.
9. Cashing out all your superannuation
It can be very tempting when you are finally eligible to access your super to withdraw it all at once.
If you have a decent-sized balance, you can probably imagine all the wonderful things you could do with those hundreds of thousands of dollars – world cruises, a new car and caravan and maybe pay off the mortgage.
But the purpose of super is to provide retirement income. While there will be the Age Pension to fall back on (if you’re old enough and your assets and income are below the thresholds), how comfortable do you think you would be living on $30,000 per year if you’re single, or $46,000 for couples? That doesn’t come close to the $53,000 and $75,000 per year ASFA says singles and couples need, respectively, for a comfortable retirement.
That’s not to say there may be sound reasons for withdrawing your super as a lump sum, especially for those with a low balance who may want to pay a few bills or do some home maintenance in preparation for their retirement.
10. Sequencing risk
People retiring today in their 60s probably remember previous market crashes and crises. They’ve lived through the global financial crisis (GFC) as well as the tech wreck of 2000 and the 1987 Wall Street crash. But nobody has a crystal ball when it comes to markets; all retirees face sequencing risk, which is very difficult to plan for.
Sequencing risk refers to the potential for retiring at a poor time in the sequence of investment market returns. Markets move in cycles and if the year in which you plan to retire coincides with a market downturn, you could retire with less than you originally planned. Investment losses early in retirement are difficult to recoup and will have a bigger impact on your total retirement income than losses incurred later in retirement.
This was the reality for people unfortunate enough to retire during the GFC. Many ended up delaying retirement and working for longer than they originally intended. While this isn’t ideal, it is one way to deal with sequencing risk. Another way is to shift your asset allocation to a more defensive setting, the closer you get to retirement, to protect your balance from share market risk.
The bottom line
As you get closer to retirement, it’s important to understand all the financial benefits and services you may be eligible for and to avoid making any of the other common mistakes outlined above.
It pays to learn as much as possible about super and retirement and to plan for a range of outcomes. And don’t forget factors such as your health, which can have a significant impact on your retirement income.
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