I’m close to retirement age. What are my options for drawing on my super savings?
- Written by Di Johnson, Senior Lecturer, Finance and Financial Planning, Griffith University
Retiring well means making a series of decisions to ensure a financially secure post-work life. One practical step is to work out the income you need each week to survive and thrive when you stop working.
If you are one of the many Australians still working and growing your super[1], knowing more about tailored retirement income products might help to plan.
There are two main ways to use super savings in retirement:
- through products that provide an income stream, and/or
- through lump sums.
These products offer flexibility, control and continued exposure to investment markets. They allow retirees to convert part, or all, of their super balance into an income stream while keeping an allocated sum invested. More than one can be set up, at different times, and with different investment choices, so your investment balance keeps growing while providing income in the short-term.
Retirees can choose how much they withdraw, as long as they meet the government’s minimum withdrawal requirements[6]. Arguably, the greatest advantage of an account-based pension within super is its tax effectiveness compared to investments outside super. Once a super member is fully retired, both the investment earnings and income drawn from an account-based pension in super is tax-free[7].
One of the disadvantages of account-based pensions in super is that the age-based minimum drawdown rates[8] might not suit your investment timing or income preferences. Investment returns are not guaranteed, and you don’t know how many years of income will be needed. If you die before the funds are fully drawn, however, your beneficiary can receive the remaining money.
Another option for regular income: annuities
Retirees can also use their super to buy another type of income product called an annuity. There are a few main types of annuities[10] and you can choose if you want the income payments:
- guaranteed over a fixed period of time
- investment-linked over a fixed period or for life, or
- guaranteed for the rest of your life, typically adjusted for inflation.
The cost of the annuity will vary depending on these factors. Annuities provide more certainty both in the payments and timeframe for income, regardless of investment market performance.
In Australia, fewer than 5%[11] of super member accounts are annuities. But that may be changing, as more retirees realise the advantages of including an annuity in their super income planning.
Annuities can be bought using super or non-super money, but using super has the advantage of tax-free earnings and income.
In addition, for age pension eligibility, Centrelink only takes into consideration 60% of the value[12] of a lifetime annuity compared to 100% of an account-based pension. This favourable treatment means your super savings can last longer, because your retirement income will be supplemented with more age pension.
On the downside, annuities have less flexibility. Once you have committed a lump sum of super to purchase the annuity, you cannot convert that back into a lump sum.
The income from annuity returns may also not be as high as in an account-based pension, because there is a trade-off between investment returns and guaranteed income.
Choosing the right mix for your circumstances
Retirees may benefit from a retirement income strategy that includes a combination of account-based pensions and annuities, depending on their personal needs and circumstances.
Once aged 67, retirees will also be eligible for the age pension, within asset or income limits. More than 60% of retirees receive at least some age pension, around 40% as their main income[13].
There is a maximum amount that can be transferred to pension phase within super, regardless of whether you choose an account-based pension or annuity, or a combination. That cap currently sits at A$2 million[14].
What about lump sums?
Once a super fund member reaches preservation age[15], usually age 60, and ceases at least one job, they may be able to access some or all their super as a lump sum. Alternatively, a member can access some or all their super as a lump sum when they turn 65, regardless of their employment.
With more people heading into retirement with mortgages[16], lump sums can be used to pay down debt, or for home repairs, holidays or even gifting.
How the lump sum is used may affect your age pension. In 2025, the average lump sum[17] taken out by newly retired members was around $58,000.
While income stream products have a range of advantages within super, taking at least some super as a lump sum is common, even later in retirement. More than $71 billion[18] was paid out in lump sums from superannuation in 2025 across 2.26 million member accounts.
Advice can help
Getting advice on coordinating super income streams and age pension entitlements can make a big difference to maximising your income while managing risk. Licensed financial advisers[19] are in high demand, either within or outside your super fund.
Super funds can provide a range of valuable information, calculators and support. Other online tools[20] are also available that can help with retirement income planning, including taking age pension eligibility into account.
Disclaimer: This article provides general information only and is not intended as financial advice.
References
- ^ growing your super (www.apra.gov.au)
- ^ CC BY-NC (creativecommons.org)
- ^ five-part series (theconversation.com)
- ^ 80% (www.apra.gov.au)
- ^ account-based pensions (www.ato.gov.au)
- ^ minimum withdrawal requirements (www.ato.gov.au)
- ^ tax-free (moneysmart.gov.au)
- ^ minimum drawdown rates (moneysmart.gov.au)
- ^ Greta Hoffman, Pexels (www.pexels.com)
- ^ annuities (moneysmart.gov.au)
- ^ fewer than 5% (www.apra.gov.au)
- ^ 60% of the value (moneysmart.gov.au)
- ^ around 40% as their main income (www.abs.gov.au)
- ^ A$2 million (www.ato.gov.au)
- ^ preservation age (www.ato.gov.au)
- ^ retirement with mortgages (www.abc.net.au)
- ^ average lump sum (www.apra.gov.au)
- ^ $71 billion (www.apra.gov.au)
- ^ Licensed financial advisers (moneysmart.gov.au)
- ^ online tools (moneysmart.gov.au)
