Ask the Expert: Super growth after retiring is great, but not a must
Is it necessary that your super keeps growing after you retire, or would you be better spending the funds on a comfortable retirement?
Question 1
I am 67, single, own my own home and have an investment property that gives me about $20,000 a year in rent.
I have a super balance of $1 million.
Would I earn more money in a super account that pays 15 per cent tax but gives a good return and from which I could just take out lump sums as needed?
Or would my super still grow if I moved it to a pension account that pays no tax but you have to take out the required minimum?
Thank you, Craig.
It will come down to a few factors.
On top of your $20,000 rental income, how much do you need to live on each year?
As you have noted, a pension fund pays no tax while a superannuation accumulation account pays 15 per cent on earnings (you can take money out of both tax-free from age 60).
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To give you an idea of the difference that this tax makes, let’s look at the country’s largest superannuation fund, AustralianSuper’s Balanced fund. In the 10 years ending June 30, 2025, the super accumulation return was 7.94 per cent per year. The pension return was 8.62 per cent per year.
That’s a difference of 0.68 per cent every year.
On your $1 million balance, that is $6800 every year. (This is an example only, it will differ from year to year and each fund will be different).
As you have pointed out, you need to draw down a minimum each year from your pension fund. This is based on your balance and age. This is shown in the below table:
As an example, if you put the whole $1 million into a pension, because you are aged 67 you would need to draw down at least $50,000 in the first year (5 per cent of your balance). You can draw out more if you want.
But don’t forget, just because you are drawing money out doesn’t mean you need to spend it all. In fact, if you wanted to, you could start contributing anything you don’t spend back into superannuation.
You can keep doing this until age 75. After that there are restrictions on contributions.
To your question, “would my super still grow?”.
Looking at it simplistically. If you are drawing out 5 per cent and your return is more than this, then your balance still should grow (it is more complicated than that because we would need to factor in timing of withdrawals, volatility of markets etc, but at a high level you see what I mean).
Without knowing your situation, it does make sense for most people to convert most/all of their super to a pension once retired.
One last thing, is it absolutely necessary that your super keeps growing after you retire? Or would you be comfortable in starting to spend down some of these funds to live a comfortable retirement?
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Question 2
Hi Craig.
I bought my house when I was single. After marrying, we lived in the house for a couple of years until we had outgrown it.
We bought a house together and settled there. I kept my house and rented it out.
When I sell that property, I intend to put the proceeds into my super – as part of the downsizer rule.
Can my husband also do the same? He lived there as my husband, but he is not on the title.
Thanks, Cathy
Hi Cathy,
The downsizer rules are quite generous. The main requirements are that you are at least 55 years old and have owned the property for at least 10 years.
For at least part of the ownership period, the property must have been your main residence, i.e. qualifies for a full or partial CGT exemption.
Even if your spouse was not on the title, as long as they meet the other eligibility requirements, they can also make a downsizer contribution.
Assuming you are both 55 years or older, it sounds like you may both be eligible to make $300,000 downsizer contributions to super.
Also note that the contributions must generally be made within 90 days after change of ownership.
I suggest speaking with your accountant, financial adviser or super fund to clarify your eligibility.
Craig Sankey is a licensed financial adviser and head of Technical Services and Advice Enablement at Industry Fund Services.
Disclaimer: The responses provided are general in nature, and while they are prompted by the questions asked, they have been prepared without taking into consideration all your objectives, financial situation or needs.
Before relying on any of the information, please ensure that you consider the appropriateness of the information for your objectives, financial situation or needs. To the extent that it is permitted by law, no responsibility for errors or omissions is accepted by IFS and its representatives.
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