Super at 65 — Managing Your Superannuation in Early Retirement

At 65, superannuation enters a new phase. You have unconditional access to your balance, earnings in pension phase are tax-free, and the Age Pension becomes accessible at 67. Managing your super effectively in the years around 65 can significantly affect how long it lasts and how much Age Pension you receive.

Average Super Balance at 65

APRA data for Australians aged 65–69 at retirement:

These figures reflect that many Australians retire with less than the ASFA Comfortable Retirement Standard suggests ($595,000 single / $690,000 couple). Most retirees supplement their super with the Age Pension.

What to Do With Your Super at 65

Convert to an account-based pension

This is the most common approach. Moving your super from accumulation phase (15% tax on earnings) to pension phase (0% tax on earnings) is one of the most tax-effective moves available in the Australian system.

The only constraint: the Transfer Balance Cap (TBC) limits how much can be moved into pension phase — $1.9M for FY2025–26. Amounts above the TBC can remain in accumulation (taxed at 15%) or be withdrawn as a lump sum.

Set a drawdown strategy

Account-based pensions have a mandatory minimum drawdown — you must withdraw at least the following percentage of your balance each year:

There is no maximum — you can draw more than the minimum.

Timing: don’t rush if still working

If you are still working at 65, your super can stay in accumulation until you reduce or cease work. Delaying the move to pension phase by a year or two allows accumulation contributions to continue, and retains flexibility.

Age Pension at 65 and 67

Age 65: Not yet eligible for the Age Pension (eligibility age is 67 for Australians born after 1 January 1957).

Age 67: Age Pension eligibility begins (subject to income and assets tests). Your super balance in pension phase is counted in both:

• Assets test: Full balance counted at market value
• Income test: Deemed income at ATO deeming rates applied to your balance

Strategic management of super drawdown speed and other asset structure can influence Age Pension entitlement — this is where financial advice at 65 often delivers significant value.

Tax on Super at 65

From age 60 onwards, all withdrawals from a taxed super fund are completely tax-free — lump sums and income stream payments alike. This applies from 60, so at 65 the position is unchanged.

The investment earnings inside your pension-phase account are also tax-free (0%). This is one of the most valuable tax concessions in the Australian system.

The Bucket Strategy at 65

A popular approach to managing super in retirement is the bucket strategy, which separates your balance into segments based on when you’ll need the money:

• Bucket 1 — Cash (1–2 years of living expenses): Low risk, immediately accessible. Covers income without needing to sell growth assets during a market downturn
• Bucket 2 — Defensive/medium-term (3–7 years): Bonds, fixed income, balanced options. Gradually refills Bucket 1 over time
• Bucket 3 — Growth/long-term (8+ years): Shares, property-related assets, high-growth options. Expected to generate the highest long-term returns

The goal is never needing to sell Bucket 3 during a downturn — Bucket 1 and 2 cover income for 7+ years, giving growth assets time to recover. This approach addresses the psychological pressure of watching a volatile market during retirement.

See Bucket Strategy in Retirement.

Age Pension Interaction — A Worked Example

At 67, the Age Pension becomes accessible subject to income and assets tests. How your super balance affects your entitlement depends on total assets:

Example: Margaret is 67, single, owns her home, and has $400,000 in an account-based pension.

Illustration only. Actual entitlements depend on all assets, income sources, and Centrelink assessment. Use the Centrelink online estimator or seek licensed financial advice.

As super drawdowns reduce the balance over time, Age Pension entitlements typically increase — providing a natural income floor. See Super and the Age Pension.

Estate Planning at 65

At 65, ensuring your super passes efficiently to beneficiaries becomes a priority. Key actions:

• Update your binding death benefit nomination (BDBN): Confirm it hasn’t lapsed (many expire every 3 years) and names the correct beneficiaries in the right proportions
• Consider a non-lapsing nomination: Some funds offer permanent nominations that don’t expire — useful for certainty, though they can still be changed
• Super and your Will: Super does not automatically flow through your estate. To include super proceeds in your estate (for example, to reach non-dependant adult children), nominate your legal personal representative as beneficiary — super then passes via your Will
• Tax on death benefits to non-dependants: Adult children who are not financial dependants pay up to 15% + 2% Medicare levy on the taxable component of a lump sum death benefit. This can be significant on large balances — estate planning strategies exist to minimise this impact

See Death Benefits in Super and Estate Planning and Super.

What to Do This Financial Year (FY2025–26)

Actionable checklist if you’re 65:

1. Confirm your Transfer Balance Cap position — ensure any moves to pension phase don’t breach the $1.9M TBC
2. Review your drawdown rate — are you drawing more or less than the mandatory minimum? Model the long-run impact on balance longevity
3. Check investment allocation — does your pension option reflect your income needs and 20-year drawdown horizon?
4. Update your BDBN — check it hasn’t lapsed and reflects your current wishes and family situation
5. Model Age Pension interaction — if turning 67, estimate how your balance will affect your entitlement using Centrelink’s online tools
6. Consider a downsizer contribution if you sell your home — up to $300,000 per person can be contributed outside normal caps
7. Review your overall estate plan holistically — super, Will, power of attorney, and other assets

Frequently Asked Questions

Do I have to draw super at 65? No. You are not required to withdraw or start a pension at 65. Super can remain in accumulation indefinitely. However, converting to pension phase removes the 15% earnings tax — so there is generally a tax advantage to making the switch when you no longer need to continue contributions.

Can I still work while drawing super at 65? Yes — at 65 you can draw any amount from super and continue working without restriction. The condition of release threshold that previously required retirement before 65 no longer applies.

What happens to my super when I die? Your super passes to nominated beneficiaries — either via a binding death benefit nomination or the fund trustee’s discretion if no valid nomination exists. Super does not automatically form part of your estate. See Death Benefits in Super.

What is the Transfer Balance Cap and does it apply to me? The Transfer Balance Cap ($1.9M in FY2025–26) limits how much can be moved into tax-exempt pension phase. If your balance exceeds this, the excess must remain in accumulation (taxed at 15% on earnings) or be withdrawn. See Transfer Balance Cap.

Can I make a downsizer contribution at 65 if I sell my home? Yes. Australians aged 55+ can contribute up to $300,000 per person ($600,000 per couple) from the sale of a principal home owned for 10+ years. No work test applies, and it does not count against non-concessional caps. See Downsizer Contribution.

How long will my super last at 65? This depends on your balance, drawdown rate, and investment return. At $500,000 drawing 5% ($25,000/year) at 6% return, super can last 30+ years. Use the Super Drawdown Calculator to model your own scenario with your actual numbers.

For more: Super by Age, Account-Based Pension Explained, Super and the Age Pension, Minimum Drawdown Rates, Make Your Super Last. For advice on managing super in retirement, speak with a licensed financial adviser via MoneySmart.