In this guide
- 1. Keeping your super in accumulation phase
- 2. Misunderstanding eligibility for the Age Pension
- 3. Not applying for relevant concessions cards
- 4. Forgetting to factor in healthcare costs
- 5. Underestimating how long you will live
- 6. The impact of inflation
- 7. Cashing out all your superannuation
- 8. Sequencing risk
- The bottom line
Over 1 million Australian retirees are potentially making a retirement mistake that could cost them thousands of dollars.
According to analysis of APRA data by Challenger Limited’s head of retirement income Aaron Minney, as of June 2023 just over 1.4 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.
Analysis by Class in its 2023 Annual Benchmark report finds that close to one in two members of APRA-regulated large superannuation funds aged 65 and over still have their entire balance in accumulation phase.
Fortunately, SMSF trustees are a little more aware of this potential mistake and only one in eight Class SMSF members over 65 had their entire balance in accumulation.
Not all retirement mistakes will be as costly as this one 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 superannuation from accumulation phase into retirement phase as soon as you are eligible means you will be paying 15% tax on your superannuation earnings when you could be paying zero.
Challenger analysis of the APRA data found that there was $255 billion in the 1.4 million member accounts that could potentially be shifted into retirement phase.
“These are large potential costs,” Minney says.
He stresses that there might be valid reasons why members leave money in an accumulation account. For example, some people are still working and receiving or making contributions, and others have more than $1.9 million in super so they can't move it all into the retirement phase.
“While there are some reasons people leave money in the savings phase (ATO data indicates around 500,000 people over 65 had employer contributions into super in 2021), for many people the reason will be ignorance of the missing benefit,” he says.
