5 mistakes you could be making with your super in retirement

Now you’re living your post-work life, your super is yours to use how you’d like. But with great power comes great responsibility. Managing your super throughout your retirement is a crucial part of your journey. 

Key learnings covered in this topic

  1. Understanding your investment strategy 
  2. How to maximise your retirement income
  3. Financial advice available to you

Here are the top five mistakes we see pension members making:

1. Changing your investment strategy when the market dips 

So the market has dipped and everyone’s in a panic. You might be tempted to follow the herd and move your super to a less-risky investment option. But now might not be the best time to make the switch. Why? You risk locking in your losses and miss benefiting when the market (inevitably) recovers. Instead, it may be better to stick to your investment strategy and ride out the wave. 

2. Choosing the wrong investment strategy for your circumstances 

The above being said, if a market dip would keep you up at night – especially if you have a lower super balance - you might be in the wrong investment option to start with.  Your investment strategy should consider your:

•    Retirement goals: what you want to achieve with your super and how long you might need it to last
•    Risk tolerance: how much risk you can bear, and 
•    Investment diversification: so your balance withstands various market cycles. 

3.    Underestimating longevity risk 

The average life expectancy is increasing, which means we’re generally staying healthier for longer. While this is great news, there are also considerations for your super. It’s important your super balance keeps growing through investment returns to provide you with an income for as long as possible, and to withstand the higher-cost-of-living environment. Adopting a conservative investment strategy too early in retirement might see your balance eroding quickly.

4.    Taking too many lump sum withdrawals 

While it may be tempting, or sometimes necessary to splash out on big ticket items, there are things to consider first. For example, what impact will the purchase have on your savings? Will it increase your wealth – like completing a renovation on your home? Is it solving an immediate problem you’re facing – like replacing a failing car? Is it going to help you live a better life over the long term?

Ultimately, it’s important to consider how these lump sum withdrawals will affect your super balance. The more you have in super for longer, the more interest will compound over time. And while this shouldn’t deter you from taking the lump sum necessarily – after all, your super’s there to help fund your retirement – it’s important to understand that the more you take, the less interest you’ll earn on your remaining balance in the future.

5.    Failing to maximise your retirement income

It’s valuable to get across the rules on government entitlements as soon as possible – or you could be leaving money and savings (hence retirement income) on the table.

Structuring your assets to improve your Age Pension eligibility and Pension Concession Card entitlement can go a long way to boosting your total retirement income. 

Similarly, being aware of other Centrelink entitlements like the Pension Supplement, Energy Supplement and Rent Assistance can help keep more money saved for your future.  

Your retirement is individual and unique. If you think you may have been making one or more of these mistakes, there’s time to right those wrongs! If you’d like to get some financial advice about your super account, we’re right here to help you – book a call-back to speak to a financial planner.

Information correct as at 18 October 2023.

^Financial advice obtained over the phone, or through MemberOnline, is provided by Mercer Financial Advice (Australia) Pty Ltd (MFAAPL) ABN 76 153 168 293, Australian Financial Services Licence #411766.