Most retirement planning articles tell you what to do. This one covers what not to do before retirement in Australia, because the mistakes retirees make in their final working years are often just as costly as anything they did or didn’t do in their 40s.
The worst part? Most of these superannuation retirement savings mistakes are easy to avoid once you know they exist. They’re not dramatic investment blunders. They’re quiet, easy-to-miss decisions that compound slowly and show up as a meaningfully worse retirement lifestyle.
Here are the biggest retirement mistakes Australians make, and what to do instead.
Please note: All figures and scenarios in this article are approximate and for illustrative purposes only. Individual outcomes will vary based on personal circumstances, investment returns, fees and current government policy. This is general information, not personal advice.
The 2 most expensive mistakes retirees make (and how to avoid them)
Before we get to the full list, these are the two mistakes that cost retirees the most money. If you only act on two things from this article, make it these.
Mistake 1: Leaving super in accumulation after you retire
Around 700,000 Australian retirees are still holding their super in accumulation phase, according to the Super Members Council. This is costing them around $650 per year each in avoidable tax. Over ten years, that’s $6,500 quietly handed to the ATO for no reason.
Earnings inside a super accumulation account are taxed at up to 15% per year. Earnings inside an account-based pension in retirement phase are taxed at zero. The moment you retire and meet a condition of release, you can convert your accumulation account into an account-based pension and immediately stop paying tax on investment earnings.
If you have $300,000 in super earning 5% per year, that’s $15,000 in annual earnings. At 15% tax in accumulation, you’re paying $2,250 in tax that you wouldn’t pay in pension phase. Every year you delay that conversion is $2,250 you don’t need to give away.
The fix is simple: when you retire, convert your super to an account-based pension rather than leaving it sitting in accumulation.
Mistake 2: Taking super as a lump sum instead of an account-based pension
One of the most common and costly retirement mistakes in Australia is withdrawing super as a large lump sum and moving it into a bank account or paying off the home with it.
The appeal is obvious. Having a large sum in your bank account feels like security. But here’s what you lose.
Tax-free investment earnings. Inside an account-based pension, your money earns returns tax-free. In a bank account, interest is taxable at your marginal rate. On $300,000 earning 4%, the tax difference at a 19% marginal rate is around $2,280 per year.
Age Pension eligibility management. An account-based pension allows you to gradually draw down your balance, reducing assessable assets over time and potentially improving your Age Pension entitlement as you age. A lump sum in a savings account is fully assessable from day one.
Compounding. Money that stays invested keeps growing. Money that sits in a transaction account earning 1% doesn’t.
For most Australians approaching retirement, an account-based pension is the right structure for the bulk of their super. It’s worth speaking with a financial adviser before making any large lump sum withdrawals from super.
These two mistakes alone can cost a retiree $4,000 to $5,000 per year in avoidable tax. Over a 20-year retirement, that’s $80,000 to $100,000 quietly lost.
Mistake 3: Misunderstanding the Age Pension assets test
This is one of the most expensive retirement planning mistakes Australians make and it’s almost always from genuine misunderstanding rather than carelessness.
Many Australians assume they won’t qualify for the Age Pension because they have super. Others assume they’ll automatically get the full pension. Both assumptions are often wrong.
The assets test has two thresholds: the lower threshold (below which you receive the full pension) and the upper threshold (above which you receive nothing). In between, the pension reduces by $3 per fortnight for every $1,000 of assets over the lower threshold.
As of 20 March 2026, for a homeowner couple the full pension applies below $481,500 in combined assessable assets, and no pension applies above $1,085,000. For singles, the full pension threshold is $321,500 and the cut-off is $722,000.
Source: Services Australia. These figures are updated each March and September.
Between those thresholds, you receive a part pension. A couple with $700,000 in assessable assets doesn’t receive zero pension. They receive a part pension worth thousands of dollars per year. That’s money many couples are not claiming because they assumed they didn’t qualify.
The income test also applies alongside the assets test. Centrelink pays whichever test produces the lower pension amount. If both tests are misunderstood, you can easily end up leaving thousands of dollars per year in unclaimed entitlements.
Phil and Dan broke down how the Age Pension tests actually interact with real super balances, including a case where super fund advice caused a couple to lose pension they were entitled to, in Episode 9 and Episode 10 of the Wealthlab Podcast. Phil and Dan also covered commonly missed Age Pension opportunities in Episode 20. For more on how the pension and Centrelink system works, see our service page.
Mistake 4: Going too conservative with super too early
Going entirely into cash or conservative options in the years before retirement feels safe. In reality, it’s one of the most quietly damaging retirement mistakes Australians make.
A conservative super option typically earns 3 to 4% per year. A balanced option earns 5 to 6% over a full market cycle. The difference between 3.5% and 5.5% on a $500,000 balance over ten years is roughly $120,000.
And here’s the part people miss: retirement doesn’t mean you’ll spend all your money in the next five years. The average retirement lasts 20 to 30 years. Money you won’t need until your 80s should still be invested in growth assets. Only money you’ll need in the next one to two years should be in cash or defensive assets.
The right approach is to hold a cash buffer of one to two years of spending, with the remainder staying in a balanced or moderate growth option. This protects you against having to sell growth assets in a market downturn (sequencing risk) while still capturing long-term returns. For a deeper explanation of sequencing risk and how to manage it, see our guide on sequencing risk in retirement.
Scott and Phil covered exactly how getting the investment mix wrong in the years around retirement can cost retirees tens of thousands of dollars, including a real case study from the GFC, in Episode 1 of the Wealthlab Podcast. Phil also pointed out in Episode 22 that what most super funds call “balanced” is really a growth portfolio with 70% or more in growth assets, so it’s worth checking what you’re actually invested in.
Mistake 5: Carrying debt into retirement
Walking into retirement with a mortgage, personal loan, or credit card balance is one of the most common retirement mistakes for Australians in their late 50s and early 60s.
According to research, around 40% of Australians in their late 50s still carry some form of debt. That’s not necessarily catastrophic, but it changes the retirement income maths significantly.
A $200,000 mortgage at 6% interest costs $12,000 per year in interest alone. That’s $12,000 of your retirement income going to debt servicing before you’ve paid for groceries, utilities, healthcare, or any lifestyle spending.
The question isn’t simply “should I pay off my mortgage before retirement?” It’s more nuanced than that. Whether it makes sense to clear debt by drawing on super, selling assets, or keeping debt while investing the difference depends on interest rates, investment returns, Age Pension eligibility, and your personal comfort with debt. Scott and Phil have a whole podcast episode on exactly this dilemma: Episode 5: Should You Pay Off Your Mortgage With Super at 60?
What’s not debatable is this: carrying high-interest consumer debt into retirement, credit cards or personal loans at 15% to 20% interest, is almost always a mistake. Clear that before you retire, even if it means delaying retirement by six months.
Mistake 6: Ignoring catch-up contribution opportunities
Many Australians spend their final working years focused on what they’ll do in retirement while completely ignoring one of the most powerful tax strategies still available to them: catch-up concessional contributions.
If your total super balance was below $500,000 at 30 June of the previous financial year and you haven’t maximised your concessional contributions cap in previous years, you may be able to make a single large contribution using up to five years of unused cap space.
With the current concessional cap at $30,000 per year (2025-26, rising to $32,500 from 1 July 2026), and many Australians having years where their employer’s SG contribution of 12% was the only amount going in, the unused cap space can be significant. The maximum five-year carry-forward available from 2026-27 is $175,000.
A one-off catch-up contribution of $60,000 taxed at 15% contributions tax instead of a 37% marginal rate saves approximately $13,200 in tax. That same $60,000 inside super then earns tax-free returns from age 60.
This opportunity has an expiry. Unused cap amounts can only be carried forward for five years. Amounts from 2020-21 expire after 30 June 2026. If you have unused cap space and haven’t used it, check your available carry-forward amounts via myGov now.
Scott and Phil covered how making the most of contribution strategies in the final working years can dramatically change retirement outcomes in Episode 7 of the podcast.
Mistake 7: Not updating super death benefit nominations
This is the retirement planning mistake that doesn’t cost you anything while you’re alive, but can cause enormous financial damage to the people you leave behind.
Super does not automatically form part of your estate. It is not controlled by your will. If you die without a valid binding death benefit nomination, the trustee of your super fund has discretion to decide who receives your super. In a blended family, this can override your actual wishes completely.
Binding nominations in many industry super funds expire every three years. A nomination you set up at 55 may have lapsed twice by the time you’re 62. Meanwhile, your life has changed: new partners, new grandchildren, changed relationships.
The stakes are also higher than people realise. If your super is paid to an adult child who is not financially dependent on you, it can be taxed at up to 17%. Super paid to a spouse is tax-free. The difference on a $400,000 super balance is $68,000.
Check your binding death benefit nomination. Confirm it’s current, that it reflects your actual wishes, and that it aligns with your will and estate plan.
Scott and Phil covered this in detail in Episode 12 of the Wealthlab Podcast on super death benefits and estate planning.
Mistake 8: Underestimating healthcare costs in retirement
Healthcare is one of the most underestimated line items in retirement planning. Most people budget for it based on what they’re spending now, in their late 50s when they’re relatively healthy, rather than what they’ll spend in their 70s and 80s.
The reality is different. Around 34% of total retirement savings is consumed by healthcare costs over the course of retirement. And the final 24 months of life typically account for 50 to 80% of a person’s lifetime healthcare spending, according to research cited by Scott in Episode 19 of the Wealthlab Podcast.
What this means practically: your retirement planning income plan needs a meaningful healthcare buffer. Private health insurance in retirement is not optional if you want to control wait times and treatment choices. The cost of basic hospital and extras cover for a couple is typically $3,000 to $5,000 per year. It needs to sit in your budget.
Aged care is the bigger wildcard. Residential aged care can cost $50,000 to $150,000 per year depending on the level of care and the facility. Couples where one partner needs care significantly earlier than the other face a particularly complex financial planning challenge.
Build healthcare costs into your retirement budget now, not as an afterthought.
Mistake 9: Retiring too early without checking the numbers
Many Australians decide they want to retire at 60 or 62 without fully running the numbers on what that means for the rest of their financial life.
The questions that matter before any retirement decision: how much will I actually spend per year, being honest about lifestyle, healthcare, and travel? How long will my super last at that spending rate before the Age Pension starts at 67? What is my likely Age Pension entitlement at 67, given my expected super balance at that point? Do I own my home, and if not, how does rent change the calculation? What does my retirement income look like at 80 and 85, not just at 65?
Retiring one year earlier than you planned can have a surprisingly large impact. As Scott noted in Episode 19, the difference between retiring at a well-funded age versus one year earlier can shift when your money runs out by five or more years, depending on balance and spending.
The free Wealthlab super calculator is a good starting point for modelling your own scenarios. For a broader readiness assessment, take the retirement quiz. And for a full analysis across super, Age Pension, and long-term income sustainability, a conversation with a financial adviser is worth far more than its cost.
Mistake 10: Waiting too long to get financial advice
This is the retirement mistake that leads to all the others. Australians who get proper retirement planning advice in their mid-50s typically make better contribution decisions, better investment allocation decisions, better drawdown decisions, and better Age Pension decisions than those who go it alone or seek advice too late.
By the time most people see a financial adviser about retirement, they’re 62 and retirement is 12 months away. At that point, some opportunities, particularly catch-up contributions, tax optimisation, and contribution timing, are already closed.
The ideal time to get retirement planning advice is five to seven years before your planned retirement date. Early enough to act on what you learn. Scott, Phil and Jordan talked about how the Wealthlab client process works and what to look for in genuine versus questionable advice in Episode 23 of the podcast.
Frequently asked questions
What are the biggest retirement mistakes Australians make?
The most common and costly retirement mistakes in Australia include leaving super in accumulation after retiring (paying unnecessary tax), taking super as a lump sum rather than an account-based pension, misunderstanding the Age Pension assets test and leaving entitlements unclaimed, going too conservative with super too early, carrying consumer debt into retirement, missing catch-up contribution windows, and not updating super death benefit nominations. Most are avoidable with proper planning.
What are the 2 most expensive mistakes retirees make?
The two most expensive mistakes are leaving super in accumulation phase after retirement (paying up to 15% tax on earnings that should be tax-free) and taking super as a lump sum rather than an account-based pension (losing tax-free compounding and Age Pension management benefits). Together, these two superannuation retirement savings mistakes can cost $4,000 to $5,000 per year in avoidable tax, or $80,000 to $100,000 over a 20-year retirement.
What should you not do before retirement in Australia?
Before retirement in Australia, avoid withdrawing super as a lump sum without modelling the tax and Age Pension consequences, switching to fully cash or conservative investments years before you need the money, assuming you won’t qualify for any Age Pension without checking, carrying credit card or personal loan debt into retirement, and leaving binding death benefit nominations expired or misaligned with your actual wishes.
How does the Age Pension assets test work and how do I avoid making mistakes?
The assets test reduces the Age Pension by $3 per fortnight for every $1,000 of assessable assets above the lower threshold. For a homeowner couple, the full pension applies below $481,500 and cuts out entirely above $1,085,000 (March 2026). The most common mistake is assuming no pension applies when you have significant super. Many retirees with $500,000 to $900,000 in assets are entitled to a part pension worth thousands of dollars per year that they don’t claim.
Is leaving super in accumulation after retirement a mistake?
Yes, for most retirees. Earnings in accumulation are taxed at up to 15%. Earnings in a retirement phase account-based pension are tax-free. Around 700,000 Australian retirees are still in accumulation and paying avoidable tax of around $650 per year each. Once you retire and meet a condition of release, converting to an account-based pension should be one of your first actions.
Should I pay off my mortgage before retirement?
For consumer debt like credit cards and personal loans, yes, absolutely. For a mortgage, it depends on the interest rate, your super balance, investment returns, and your personal comfort with debt. A mortgage at 5.5% versus super in a balanced option returning 6% is a genuine trade-off worth modelling. High-interest consumer debt is not a trade-off. Clear that first, always. Scott and Phil discuss this in detail in Episode 5 of the podcast.
When should I get retirement planning advice in Australia?
The ideal time is five to seven years before your planned retirement date. This gives a financial adviser time to implement catch-up contributions, review your investment mix, model Age Pension scenarios, and structure your drawdown strategy before the window closes. Many people wait until they’re 12 to 18 months from retirement, which limits what’s possible.
What are the top 10 retirement mistakes?
The top 10 retirement mistakes Australians make are: leaving super in accumulation after retiring, taking super as a lump sum, misunderstanding the Age Pension assets test, going too conservative with investments too early, carrying debt into retirement, ignoring catch-up contribution opportunities, not updating super death benefit nominations, underestimating healthcare costs, retiring too early without running the numbers, and waiting too long to get professional advice. This article covers all ten with specific dollar impacts and practical fixes.
Avoiding the biggest retirement mistakes starts with awareness
The biggest retirement mistakes in Australia are rarely dramatic. They’re quiet decisions made in the years before retirement that reduce income, increase tax, or leave government entitlements unclaimed. The good news is that most are avoidable once you know what to look for.
If any of this has raised questions about your own situation, book a free chat with the Wealthlab team. No pressure, no jargon.