It’s one of the most common fears for anyone approaching or already living in retirement: what happens if the money runs out before you do? With Australians increasingly living into their late 80s and 90s, a 30-year retirement is no longer unusual, which means the money you’ve saved needs to work harder, and smarter, for longer than previous generations ever had to plan for.
The good news is that running out of money in retirement is rarely inevitable. It’s usually the result of a handful of avoidable planning gaps. Here are the sound, well-established strategies worth understanding.
One of the most widely referenced guides in retirement planning is the “4 per cent rule” – the idea that withdrawing around 4 per cent of your starting retirement balance each year, adjusted for inflation, gives a strong probability your money will last 30 years. On a $600,000 balance, that works out to roughly $21,000 to $24,000 a year drawn from your super, generally supplemented by the Age Pension for most retirees.
It’s worth treating this as a starting benchmark rather than a hard guarantee. Increasingly, financial researchers suggest a slightly more conservative rate, closer to 3.5 to 4 per cent, particularly for those retiring earlier or wanting a genuine buffer against inflation, healthcare costs and market downturns later in life. The key isn’t finding one perfect number, but understanding roughly where your own sustainable withdrawal rate sits, and revisiting it periodically rather than setting and forgetting it.
If you hold an account-based pension, the government sets minimum amounts you must withdraw each year, and these minimums rise as you age:
Age 60–64: 4 per cent
Age 65–74: 5 per cent
Age 75–79: 6 per cent
Age 80–84: 7 per cent
Age 85–89: 9 per cent
Age 90–94: 11 per cent
Age 95+: 14 per cent
It’s important to understand that these are minimums, not recommendations. In stronger investment years it can be tempting to withdraw more simply because you’re permitted to, but doing so, particularly in the early years of retirement, can meaningfully shorten how long your savings will actually last. Treat the minimum drawdown rate as a floor, not a target.
This is one of the least understood but most damaging risks in retirement planning. Experiencing poor investment returns in the first few years of retirement, right when you’re also withdrawing money, can permanently damage how long your portfolio lasts, even if markets recover strongly later on. A downturn that happens to land early in your retirement does far more damage than the same downturn happening a decade in.
This is why many financial planners recommend holding one to two years of living expenses in cash or a high-interest savings account specifically, so you’re never forced to sell growth assets like shares during a market downturn just to fund everyday spending.
A commonly recommended strategy is to divide your retirement savings into three broad buckets based on when you’ll need the money, rather than holding everything in one undifferentiated pool:
Bucket one: one to two years of living expenses, held in cash or term deposits, for immediate spending needs.
Bucket two: three to five years of expenses, held in more conservative investments like bonds, to refill bucket one as it’s drawn down.
Bucket three: the remainder, held in growth assets like shares, given time to recover from any downturns before you actually need to draw on it.
This structure means short-term market volatility doesn’t force your hand into selling growth investments at exactly the wrong time.
Even if you’re not eligible for a full pension today, it’s worth understanding how the Age Pension interacts with your super. As of March 2026, the full single pension sits at approximately $31,223 a year, and around $47,070 a year combined for a couple. For many retirees, particularly later in retirement as super balances naturally decline, the pension becomes an increasingly important part of the income picture, not simply a last resort.
It’s worth knowing your assets and income are assessed under Centrelink’s tests, and that savings and investments are “deemed” to earn a certain rate of income regardless of what they actually pay – worth checking with Services Australia or a financial adviser on how your specific asset mix affects any pension entitlement, both now and as your balance changes over time.
It’s common for retirees to budget carefully for the early, active years of retirement – travel, hobbies, home renovations – without factoring in that healthcare and aged care costs tend to climb significantly in the later years. A couple comfortably managing on a certain income in their late 60s may find that by their mid-80s, additional medical and care costs add meaningfully to their annual spending. Building some allowance for this into your long-term plan, rather than assuming your spending will simply decline as you age, helps avoid an unwelcome shortfall exactly when you’re least equipped to manage it.
Beyond your day-to-day retirement income, it’s worth maintaining a dedicated emergency fund for the unplanned costs that inevitably arise – a car repair, an unexpected medical bill, home maintenance. Aim for at least three to six months of expenses held somewhere secure and easily accessible, so an unexpected cost doesn’t force you into an ill-timed withdrawal from your main retirement savings.
For many Australians, the family home represents a significant portion of total wealth, separate from super. Options like downsizing to release equity, or products that allow you to access home equity without selling, are worth understanding even if you don’t intend to use them immediately. Knowing what options exist gives you genuine flexibility later, rather than treating super as the only lever available if money becomes tight.
Perhaps the most important habit of all is treating your retirement income strategy as something to review periodically, rather than a decision made once at retirement and left untouched for decades. Markets move, personal circumstances change, and rules around pensions, super and aged care are updated relatively often. An annual check-in, ideally with a licensed financial adviser, helps ensure your withdrawal rate, investment mix and pension eligibility all still reflect your actual situation, rather than assumptions made years earlier that may no longer hold true.
Running out of money in retirement is rarely about one single mistake. It’s usually the slow accumulation of small gaps: a withdrawal rate that’s slightly too high, a market downturn hitting at the worst possible time, healthcare costs that weren’t fully planned for, or simply never revisiting the plan once it’s set. Understanding these risks now, while you have time and flexibility to adjust, is the single best protection against them.
This article is general in nature and isn’t personal financial advice, as it doesn’t take into account your individual circumstances, needs or objectives. Before making any decisions about your retirement income, consider speaking with a licensed financial adviser.
Comments 0
Join the conversation. Comments are reviewed before they appear.
Be the first to comment.
Join the conversation
Tell us who you are to post a comment. We'll remember you next time.