Financial Planning in Your 60s Australia: From Accumulation to Distribution

Everything you've done financially until now has been about building. Your 60s require a fundamentally different mindset - drawing down assets intelligently across a retirement that may last 30 years.

• Super is fully accessible from 60: From age 60, superannuation can be accessed completely tax-free as a lump sum or pension income stream. The taxable component that attracted 15% tax before 60 becomes 0% from 60. There is no longer a tax reason to delay accessing super after 60.
• Age pension eligibility begins at 67: For Australians born after 1 January 1957, age pension eligibility starts at 67. If you retire at 62, you have a 5-year gap between super access and age pension eligibility. Structuring assets across this gap without depleting super is a key planning challenge.
• Sequencing risk is now real: In accumulation, market crashes are recoveries in waiting - time heals them. In retirement, drawing down assets during a crash forces you to sell at the worst prices. A 30% market fall in year 2 of retirement is far more damaging than the same fall in year 20. Portfolio construction must reflect this.
• Longevity risk replaces accumulation risk: The primary financial risk in retirement is outliving your money. A 65-year-old Australian woman has a 50% chance of living to 90. A couple aged 65 has a 50% chance of at least one partner living to 92. Plan for 30+ years, not 20.
• Spending patterns change: Retirees typically spend most in the 'go-go' years (60s–early 70s - travel, activities), less in the 'slow-go' years (mid-70s to mid-80s), and face high costs again in the 'no-go' years (aged care). Income needs are not flat; they peak early and late.

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An account-based pension (ABP) - also called an allocated pension - is the standard way Australians draw income from super in retirement. Understanding how it works is essential for retirement planning.

• How an ABP works: You convert your super accumulation account (or a portion of it) into an ABP. Your funds remain invested; you draw a minimum annual income (a percentage of the account balance). Earnings inside the ABP are tax-free from age 60.
• Minimum drawdown rates: The government sets minimum annual drawdown percentages based on age. Ages 60–64: 4%, 65–74: 5%, 75–79: 6%, 80–84: 7%, 85–89: 9%, 90–94: 11%, 95+: 14%. These are minimums - you can draw more. The minimum was halved during COVID and returned to full rates for 2023-24 onwards.
• Tax treatment: ABP income paid from age 60 is completely tax-free (no tax regardless of amount, no Medicare levy). This is a material advantage over equivalent income drawn from personal accounts or term deposits, which are fully taxable.
• Investment within the ABP: Assets inside the ABP continue to be invested. The fund earns returns (tax-free), and you draw the minimum (or more) each year. If investment returns exceed drawdown, the balance grows. If drawdown exceeds returns, the balance depletes.
• The transfer balance cap: The maximum you can transfer from accumulation to pension phase (into an ABP or other retirement income stream) is $1.9M (2024-25, indexed periodically). Amounts above this must remain in accumulation phase, earning at the 15% tax rate.
• Multiple ABPs: You can have multiple account-based pensions - for example, one from your employer fund and one from an SMSF - provided the total doesn't exceed the $1.9M transfer balance cap.

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Retiring before 67 creates a gap where you have super access but no age pension. Structuring income across this period determines both tax efficiency and long-term wealth preservation.

• The gap years cash flow: From 60 to 67, income comes from: ABP drawdown (tax-free), any personal investments (taxable), and potentially part-time work. The goal is covering living expenses while minimising tax and preserving super for maximum compound growth.
• Keep the ABP drawdown at minimum initially: In your 60s, drawing only the 4% minimum from the ABP preserves the bulk of the fund for continued tax-free compounding. Supplement with personal assets (term deposits, share income) that would otherwise be fully taxable - the tax treatment difference between ABP income (0%) and personal investment income (marginal rate) makes the ABP the most tax-efficient source.
• The low-income offset advantage: During the gap years, if your only income is ABP payments (tax-free, not declared as income), your taxable income may be $0. This means you can strategically draw on personal investments and pay minimal or no tax - the $18,200 tax-free threshold plus the low-income tax offset effectively make the first $21,884 of personal income tax-free.
• Consider delaying full retirement: Working part-time from 62–67 while drawing a small ABP income can maintain lifestyle without depleting super, allow continued super contributions (if still employed), and preserve the age pension option more intact.
• Centrelink transition - age 67: When age pension eligibility arrives, have your assets assessed in advance. Services Australia recommends applying 13 weeks before your 67th birthday. The interaction between your super balance, investment assets, and age pension entitlement should be modelled 2–3 years in advance.

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Sequencing risk - the risk of poor market returns early in retirement - is the greatest financial threat for recent retirees. Several strategies reduce this risk without sacrificing long-term growth.

• The bucket strategy: Divide retirement assets into three buckets. Bucket 1: 1–2 years of living expenses in cash or short-term term deposits - never touched by market movements. Bucket 2: 3–7 years of expenses in defensive assets (bonds, hybrid securities). Bucket 3: everything else in growth assets (shares, property). In a market downturn, draw from Bucket 1 while Bucket 3 recovers.
• Annuities as a sequencing buffer: A lifetime annuity (from Challenger or similar) provides guaranteed monthly income regardless of market conditions. Partially annuitising income needs - covering fixed expenses (rent, food, utilities) with annuity income - removes the necessity to sell growth assets during downturns to fund living expenses.
• Dynamic drawdown: In strong market years, draw more from the ABP (rebalancing naturally). In poor market years, reduce discretionary spending and draw minimums only, allowing the portfolio time to recover. Flexibility in spending is the most effective sequencing risk management for retirees with discretionary budget capacity.
• Don't be too conservative too early: Many retirees shift entirely to cash and bonds at 65, fearing market risk. With a 30-year retirement horizon, excessive conservatism creates a different risk - insufficient growth to maintain purchasing power over inflation. A 65-year-old should typically maintain 50–70% growth assets.

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Aged care is the largest unplanned financial event most Australians face. Planning in your 60s - before it's urgent - allows for better decisions and better outcomes.

• The aged care system: Home care packages (Levels 1–4) fund in-home support. Residential aged care provides full-time care in a facility. Both have means-tested fees. The system was substantially reformed under the Support at Home program from 1 July 2025.
• The Refundable Accommodation Deposit (RAD): Residential aged care typically requires a RAD - a lump sum accommodation payment (average around $400,000–$550,000 in metropolitan areas). This is returned when the resident leaves or passes. It can be paid as a lump sum, a Daily Accommodation Payment (DAP) - essentially rent - or a combination.
• Means-tested care fees: Beyond accommodation, residents pay means-tested care fees based on income and assets. The assessment includes financial assets but the family home has partial and time-limited protection. Understanding the assessment rules before placement allows for legal and legitimate structuring of assets.
• The family home question: Entering residential care triggers a 2-year exemption on the family home in the Centrelink assets test. After 2 years, the home becomes an assessable asset (unless a protected person - spouse, dependent child, carer - lives there). Selling vs retaining the family home involves complex RAD, age pension, and estate planning trade-offs.
• Plan in your 60s, act in your 70s: Aged care planning conversations with an aged care specialist financial adviser are most valuable at 65–70 - before there's urgency, while you have time to structure assets appropriately and brief family members. Don't leave this until a crisis.

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