Retirement planning in Australia

How to prepare for retirement in Australia, including how to choose a super fund and grow your balance well before you retire.

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The main key to retiring in style is leveraging your superannuation fund. This guide explains how to devise a superannuation strategy that works for you and how to plan for further income in old age, and gives you tips for pulling it all together.

In all cases your first step should generally be to consolidate your super into a single fund, unless you're deliberately keeping them separate. This means choosing the right type of super fund and knowing about the available options. If you already have your super fund sorted out and are crystal clear on all the details, then you might want to jump ahead to planning your income in retirement.

Otherwise, start at the beginning.

Virgin Money Super LifeStage Tracker has one of the lowest fees in the market and has strong 3 year performance. It invests in a mix of assets in line with your age, reducing your risk as you near retirement. The investment team was named a Responsible Investment Leader 2020 and 2021 by the Responsible Investment Association Australasia.
Green Company
Certified by the Responsible Investment Association Australasia.

This fund invests in renewable energy, innovative technology and sustainable products while avoiding coal, oil, tobacco and live animal exports.
Name Product Last 1 year performance (p.a.) Last 3 year performance (p.a.) Last 5 year performance (p.a.) Last 10 year performance (p.a.) Fees on $50k balance (p.a.)

AustralianSuper - Pre-mixed, Balanced option

Finder Award
AustralianSuper - Pre-mixed, Balanced option
AustralianSuper is an award-winning industry super fund and the largest super fund in Australia. The Balanced fund invests in a mix of different assets like shares, property and cash.

Virgin Money Super - LifeStage Tracker

Virgin Money Super - LifeStage Tracker
New Fund
New Fund
Virgin Money Super LifeStage Tracker has one of the lowest fees in the market and has strong 3 year performance. It invests in a mix of assets in line with your age, reducing your risk as you near retirement. The investment team was named a Responsible Investment Leader 2020 and 2021 by the Responsible Investment Association Australasia.

Sunsuper Lifecycle Balanced

Finder Award
Sunsuper Lifecycle Balanced
Sunsuper is an award-winning super fund with more than 1.4 million members. Its Lifecycle Balanced option invests your super in a mix of growth assets, and reduces your risk when you're near retirement.

Australian Ethical Super Balanced

Green Company
Australian Ethical Super Balanced
Certified by the Responsible Investment Association Australasia.
Australian Ethical seeks to invest in companies that have a positive impact on the planet, people and animals, such as renewable energy and healthcare while avoiding investments in coal, oil, tobacco and gambling.

Spaceship GrowthX

Spaceship GrowthX
New Fund
New Fund
This is a high-risk investment option that aims to deliver high returns over the long term.
Spaceship's GrowthX fund invests heavily in technology ETFs with high exposures to Australian and international shares. Performance figures and fees supplied by Spaceship, not Chant West.

QSuper Lifetime - Aspire 1

QSuper Lifetime - Aspire 1
New Fund
QSuper is one of the largest profit-for-members funds in Australia. QSuper Lifetime continually adjusts your investment mix in line with your age and your super account balance.

UniSuper Balanced

UniSuper Balanced
UniSuper is an industry super fund and one of Australia's largest super funds with more than 450,000 members. Its Balanced option invests in a mix of different asset classes and charges some of the lowest fees of all default super products.

Aware Super Growth

Aware Super Growth
Aware Super is a not-for-profit fund with more than 750,000 members. The MySuper product invests your super in a pre-mixed Growth fund until you’re 60, then it’ll switch to Balanced.

HESTA Balanced Growth

HESTA Balanced Growth
HESTA is an industry super fund for the health and community services sector and open to all Australians. The Balanced Growth fund invests in a mix of asset classes without taking on too much, or too little, risk.

Australian Catholic Super Lifetime - Grow

Australian Catholic Super Lifetime - Grow
New Fund
New Fund
A Catholic super fund open to all Australians and designed for people working in Catholic education, healthcare or aged care.The Lifetime One fund option changes your investment mix as you get older.

Verve Super Balanced

Verve Super Balanced
New Fund
New Fund
New Fund
Verve Super is an ethical super fund tailored for women. It seeks to invest in companies making a positive impact, such as renewable energy and women in leadership, while avoiding those that cause harm, such as fossil fuels, tobacco and guns.

Superhero Super Autopilot

Superhero Super Autopilot
New Fund
New Fund
Superhero Super Autopilot allows you to invest up to 30% of your super in different themed ASX shares and ETFs, with at least 70% of your balance invested in the Vanguard Global Diversified Index Portfolio. Performance and fees are based on having 100% of your balance in the index portfolio.

REST Super - Core Strategy

REST Super - Core Strategy
REST is an industry super fund tailored towards the retail sector and open to all Australians with almost 2 million members. The Core Strategy is a diversified investment portfolio that balances risk and return.

AustralianSuper - Socially Aware

AustralianSuper - Socially Aware
The AustralianSuper Socially Aware option doesn't invest in Australian or international companies that directly own coal and fossil fuel reserves, produce tobacco or those which have single-gender boards. Investment performance as of 30 June 2020.

Aware Super - Diversified Socially Responsible Investment

Aware Super - Diversified Socially Responsible Investment
The Aware Super Diversified Socially Responsible Investment is a pre-mixed investment option that excludes companies operating in the tobacco, ammunition, gambling, alcohol, forest logging and pornography industries, as well as companies that attribute 20% or more of their revenue to coal, oil and gas.

Sunsuper - Socially Conscious Balanced

Sunsuper - Socially Conscious Balanced
Certified by the Responsible Investment Association Australasia.
The Sunsuper Socially Conscious Balanced option avoids investment in companies that have significant exposure (more than 5% of revenue) to alcohol, tobacco, gambling, pornography, coal and nuclear power manufacturing. Investment performance as of 30 June 2020.

Compare up to 4 providers

The information in the table is based on data provided by Chant West Pty Ltd (AFSL 255320) which is itself supplied by third parties. While such information is believed to be accurate, Chant West does not accept responsibility for any inaccuracy in such information. Chant West’s Financial Services Guide is available at . Finder offers no guarantees or warranties about the data and we recommend that users make their own enquiries before relying on this information. Performance, fees and insurance data is based on each fund's default MySuper product. Where the performance, fees and insurance data for the MySuper fund vary according to the member's age, results for individuals between 40-49 years of age have been shown. Past performance is not a reliable indicator of future performance.

How to compare super funds:

  • Fees: Look for lower fees, as these will be paid over time out of your retirement nest egg. Specifically look for additional value to justify any fees and consider avoiding options that don't deliver.
  • Investment choices: Look for a fund that has options to suit your needs and personal appetite for risk.
  • Extra benefits. Your employer is required by law to pay a certain proportion of your ordinary earnings into your super fund, but this base amount is only the core contribution. Some funds will have more than this, while others have additional ways you can make contributions.
  • Performance. When comparing superannuation fund investment performance, look at how it's done over the last five years, and look for consistently good performance.
  • Insurance. Many super funds offer some form of life insurance cover, but typically at extra cost. Weigh the costs and benefits.
  • Service and additional benefits. MySuper only offers core investment and retirement planning, but retail and other funds can provide varying additional benefits. Once again, consider these but be mindful of the cost.

How to pick a super fund

Here are some tips on how to choose a super fund type:

  • If an SMSF doesn't sound right for you then it's probably safe to rule it out immediately.
  • Consider using MySuper as a baseline against which to compare retail super funds, as well as industry or corporate funds.
  • If you've compared other options and found nothing preferable to MySuper, then that's probably the way to go.

Choosing an investment strategy

An investment strategy is all about mixing up growth and defensive investments until you have a balance that works. Growth investments are the high risk ones such as real estate or shares that may considerably increase or decrease in value, while defensive investments are the low risk ones like cash and fixed interest accounts that generally won't lose much value.

Superannuation investment strategies can be divided into four groups, representative of most of the options out there. Going with your personal taste for risk versus reward can work, but there are some other factors to consider, in particular:

  • Higher risk options (growth and balanced) typically have better returns in the long run.
  • You can, in the long run, expect higher risk options to actually lose money in the bad years. Typically they will make it back and then some in the good years.
  • Some funds may also offer "high growth" options that invest 100% in shares and property.
  • The default MySuper option is typically equivalent to a balanced strategy.

Note that these options do not apply to MySuper, which has its own special strategies explained further below.

TypeApproximate investment mixTypical expected returnExpect a loss
GrowthHigh risk, high return85% shares and property, 15% cash or fixed interest6.2%4 or 5 years in 20
BalancedMedium risk, medium return70% shares and property, 30% cash and fixed interest5.7%4 years in 20
ConservativeLow risk, low return30% shares and property, 70% cash or fixed interest4.2%0 years in 20
CashNo risk, guaranteed returns100% fixed interest with Australian institutions2.9%0 years in 20

How to choose an investment strategy

When picking an investment strategy, some of the most important factors to consider are your age, your situation and your personal taste for risk.

  • Age: Higher risk options are usually more suitable for younger people, while safer lower-risk options are often preferable for older people.
    • In the longer run, higher risk super funds have more time to ride out the ups and downs of the market, and end higher.
    • Older people, or anyone else who may be drawing super within a few years, may be at higher risk of losing funds to a single bad year at the wrong time.
  • Your situation: If your retirement goals require a specific investment strategy, then it might be worth opting for a higher risk than you would normally take for a shot at it. Similarly, if you know you'll need at least a certain amount then a low risk strategy could be a much more dependable option.
    • Consider how much you'll need for retirement. If a low or no risk strategy can help you achieve it comfortably you might want to consider playing it safe.
    • If you'll be withdrawing your super in the near future, lower risk investments are substantially safer.
  • Your taste for risk: This is important because an investment strategy that works for you is one that you are comfortable with. You'll usually be in it for the long run, so avoid a strategy that keeps you lying awake at night.

MySuper investment strategies

MySuper has two straightforward investment options. The default, and the more popular of the two, is generally equivalent to a balanced investment strategy. You can find out more about the exact investment strategy and breakdown by checking with your super fund.

The second is the lifecycle investment strategy option, which automatically adjusts the risk levels based on your age. A typical lifecycle investment strategy mix might look like:

  • 85% growth, 15% defensive investments up to age 45
  • 75% growth, 25% defensive from age 45 to 55
  • 55% growth, 45% defensive from age 55 to 65
  • 40% growth, 60% defensive age 65+

Planning your income in retirement

Superannuation is just one of your post-retirement income sources. Knowing about and planning for all the other ones that may apply can help you balance the budget. After retirement you may still earn income from sources like:

  • Age pensions
  • Home equity releases
  • Selling off assets like the family home
  • Working part-time
  • Investments outside of super
  • Superannuation

Once you know how much you will need for retirement, you can look at these expenses next to your sources of income. In addition to this, there are several ways to manage your superannuation income to make it work for you.

Upon retirement, you are able to get paid the total amount you have saved in your superannuation fund, and can divide that amount into specific types of payments. Depending on your situation, you can use these options to make your retirement funds go further.

Lump sum: Get super paid out as a lump sum.

  • You generally pay no taxes on lump sums withdrawals if you are aged 60 or over, and 22% if you are under your preservation age at the time of withdrawal. If you are between your preservation age and the age of 59, then the first $195,000 is tax free and the remainder is taxed at 17%. By waiting longer to withdraw a lump sum you might be able to pay less tax, but will not have access to the funds as soon.
  • Lump sum payments can be a good choice if you want to reinvest the money quickly.
  • Beware of this option if you have poor spending control.

Regular income stream: Get paid from your super in regular instalments.

  • Choose payments of almost any size and vary them as needed from year to year.
  • Get regular smaller payments, and manage payment size for tax advantages.
  • Save money day to day by being able to budget for a consistent income.

Purchase an annuity: Annuities can give you guaranteed income and other advantages for defined periods, but typically do not pay as much as other options.

You can combine the above options as desired to create an after-retirement financial plan that works for your needs. One of the main ways to save more money here is with the considerations around superannuation payouts, for example ensuring any lump sums fall short of the taxable threshold. Consulting a financial adviser ahead of time can be a valuable way of planning for retirement and making sure you've optimised your finances.

10 retirement planning tips

  • Diversify your investments. If you will be dependent on your investments to support you in retirement, diversification is vital. Make sure you invest across a variety of options and never put all your eggs in one basket.
  • Consider managed funds for property investment. Property investments can be potentially lucrative, but carry a high price tag that puts it out of reach of many people. Managed funds, which are where a professional manages your superannuation investments for you, can invest your money in real estate, even if you don't have enough to do so yourself.
  • Don't underestimate savings accounts. Good old fashioned bank accounts are still one of the few ways to enjoy a guaranteed return on investment.
  • Protect your assets. You'll largely be living off your assets after retirement and it's a good idea to make sure they're protected no matter what form they take. This might be anything from purchasing insurance for your property to getting sturdy waterproof bags for the stacks of cash under your mattress.
  • Plan on living longer. Age 65 to 100 is a long time, almost enough to get you to middle age all over again. These days it can be prudent to plan on living for that long, or even longer, after retirement.
  • Claim all the benefits you can. In addition to age pensions, you may be eligible for other assistance. Set pride aside and make sure you are claiming as much as you can.
  • Remember your goals. Your retirement goal is probably to save as much money as you can ahead of time. Keep this in mind, and remember to look at the actual over-time value of investments and expenditures.
  • Plan a lifestyle. If your superannuation fund isn't on track to buy a private island by the time you're 65, you might need to reconsider your planned lifestyle. Plan a post-retirement lifestyle that works for you and your means.
  • Stress-test your retirement plan. How robust is your retirement plan in the face of adversity? When you're budgeting it, consider adjusting some of the variables to see how well it can withstand changing circumstances.
  • Start ASAP. The sooner you start working out your superannuation and retirement plans, the sooner you can really focus on saving. The last decade or so before retirement is a good time to make sure everything is in order, but everything before then is a good time to save as much as you can. Remember, money you put into your super fund usually grows over time. It might seem like it's disappearing at times, but in fact it's doing the exact opposite.

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