10 retirement mistakes you don’t want to make

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.