How to make your super last longer

Whether it’s choosing a product with guaranteed lifetime income or taking on more investment risk, making your retirement savings stretch as far as possible can be done with some simple changes.

1. Choose an investment option with more growth potential 

A simple way to help make your super last longer is to change your investment strategy.

Selecting a less conservative investment option means allocating more of your account balance to growth-oriented assets and less to defensive assets (such as cash and fixed interest).

Investing more of your savings in growth assets (such as shares and property) could help boost your super savings as these assets generally provide higher average returns in the long run.

2. Add lifetime income to the mix

Using some of your super to invest in a lifetime income stream not only means you receive payments for life, but could also increase your Age Pension or make you eligible for it when you weren’t before.

You can choose between products that provide a guaranteed income indexed to inflation or a variable income linked to investment market performance.

The potential to improve your Age Pension comes from favourable Centrelink means testing for these products.

3. Start using a bucket strategy

Once you retire and begin drawing income from your super, you need to balance competing requirements. You need both capital growth to ensure your savings last the distance, and access to liquid assets for regular withdrawals.

One way to stretch your savings a bit further in an account-based pension is to use a bucket strategy that establishes different pools (or buckets) of money with different objectives and different investment strategies.

Your short-term bucket contains liquid investments (such as cash and term deposits) for regular pension payments, while the medium-term bucket aims for some capital growth to top up the short-term bucket.

The long-term bucket is invested to create long-term capital growth and reduce the risk that your retirement savings will run out.

4. Downsize your house to upsize your super pot

If you’re worried about a lack of retirement income, consider using your other resources, such as your home. For most Aussies, their home is one of their biggest assets and the equity they have built up in it can be a valuable source of additional income.

One option is to downsize by selling your home and moving to a cheaper property. In some cases, moving to a smaller or less expensive home can free up considerable capital for generating a new source of retirement income.

Before deciding to downsize, don’t forget to check how much you are likely to end up with, as there are transaction fees and taxes to pay whenever you buy and sell property.

Selling your home could also allow you to make a downsizer contribution of up to $300,000 ($600,000 for a couple) into your super account. There is no upper age limit for downsizer contributions; if you qualify, this could be a good way to get more money into the tax-efficient super system.

If downsizing doesn’t appeal, you still have options. You could rent out a room or take out a reverse mortgage.

5. Consider a smaller inheritance

Many retirees are keen to leave a financial legacy for their children, grandchildren or other family members. Some want to leave something for their favourite charity.

While this is understandable, it’s worth remembering that superannuation is primarily designed to provide income during retirement, not to build an inheritance.

If you’re concerned about whether your savings will last throughout retirement, reconsidering how much you plan to leave beneficiaries can help your money go further.

It’s also important to understand that super benefits paid to adult children or other non-dependants may be taxed, which can reduce the amount they ultimately receive.

6. Check your super fund’s performance and fees 

Sub-par performance and high fees can eat into your balance and leave you with less to live on. Regularly checking how your fund compares is important, but it is a task that many retirees overlook, particularly after starting a pension with their super savings.

Account-based pensions and accumulation accounts can be moved to another fund if you find a better deal, but if you’ve purchased a lifetime income stream, you’re usually locked in.

7. Consider contributing more to your super

Even after you retire, it may still be possible to add more money to your super and boost the savings supporting your retirement income.

Some retirees choose to move savings held outside super back into the tax-advantaged super environment by making a contribution to their accumulation account and then starting or increasing an account-based pension.

In other cases, people who continue working part-time may still be able to make additional super contributions, which can increase the amount available to fund their retirement.

Before doing this, it’s important to check the contribution rules and limits that apply to your situation.

How long should your super last?

If you’re worried about your retirement savings running out, it’s a good idea to explore how many years in retirement you need to fund.

A good place to check out your possible lifespan is the lifetime estimator calculator. This online tool will give you some idea of how many years you may need to stretch your existing retirement savings.