When you retire, your super shifts from a long-term savings vehicle into your main income source. The mechanics change too. You move from one type of account to another, the tax treatment changes, and a new set of rules applies to how much you can hold inside super and how much you have to draw each year.
This guide walks through what specifically happens to your super at and after retirement: when you can access it, the difference between accumulation and pension accounts, how an account-based pension actually works in practice, and the decisions worth understanding before you make them.
The three types of super account
Most people only have an accumulation account during their working years. When you retire, two more account types become relevant.
- Accumulation account. This is the standard super account where contributions go during your working years. Investment earnings inside the account are taxed at 15%. Withdrawals before preservation age are generally not allowed except in limited circumstances.
- Account-based pension (also called a retirement-phase pension or allocated pension). When you retire, you typically transfer some or all of your super from accumulation into this account. Investment earnings inside an account-based pension are tax-free (up to the Transfer Balance Cap, which is $2 million from 1 July 2025). The trade-off is that a minimum amount has to be drawn each year.
- Transition-to-retirement (TTR) pension. Available from preservation age (60) while you’re still working. Lets you draw some income from super before fully retiring, but with restrictions: maximum 10% drawdown per year, and earnings inside a TTR pension are still taxed at 15% (not 0% like a full retirement-phase pension).
Most retirees end up with an account-based pension as their main retirement vehicle, sometimes alongside a residual accumulation account if they’re still working part-time or contributing.
Please note: All figures, projections 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.
When you can actually access super
Reaching preservation age (60 for anyone born after 1 July 1964) does not automatically unlock your super. You also need to meet what’s called a condition of release. The four most common are:
- You’ve retired from employment after age 60 and don’t intend to return to work for 10 or more hours per week
- You’ve ceased an employment arrangement after age 60, even if you take up other work afterwards (this is sometimes called the “60 and ceased employment” condition)
- You’ve turned 65, at which point super becomes fully accessible regardless of work status
- You’re starting a TTR pension, which is a partial-access option from preservation age while still working
Phil explained this distinction on the podcast episode Is 61 the New Retirement Age in Australia?: “Preservation age does not mean you automatically have access to super, but it means you’re of an age where you can start ticking boxes.”
The ATO’s guide to super withdrawal options sets out all the conditions of release in detail.
What changes when you move super to retirement phase
The mechanical shift from accumulation to retirement phase is one of the most consequential moments in the retirement income system. Three things change:
Earnings tax drops from 15% to 0%. Investment earnings inside an accumulation account are taxed at 15%. Once the balance moves into an account-based pension, those earnings are tax-free, up to the $2 million Transfer Balance Cap. On a $500,000 balance earning 6% a year, that’s the difference between $4,500 a year in tax (accumulation) and zero (pension phase).
Withdrawals after 60 are tax-free. Whether you take a lump sum or a regular income payment from your account-based pension, the amount is generally tax-free in your hands. This applies to the “taxable component” of super that would have been taxable before 60.
Minimum drawdown rates kick in. Once your money is in an account-based pension, the ATO sets a minimum amount that has to be drawn each year. The percentage scales up with age:
| Age band | Minimum annual drawdown |
|---|---|
| Under 65 | 4% |
| 65 to 74 | 5% |
| 75 to 79 | 6% |
| 80 to 84 | 7% |
| 85 to 89 | 9% |
| 90 to 94 | 11% |
| 95+ | 14% |
There’s no maximum drawdown on a normal account-based pension (TTR pensions cap at 10%). You can draw more than the minimum at any time, take ad-hoc lump sums, or vary your payment frequency. The minimum is the floor.
How an account-based pension actually works in practice
Once you’ve set up an account-based pension, the practical mechanics are reasonably straightforward.
Your money stays invested in your chosen investment option, the same way it was in accumulation. You can usually choose between conservative, balanced, growth, or high-growth options, and you can split across multiple options if you prefer. The balance fluctuates with markets the same way it did in accumulation.
You set the payment frequency (typically monthly or fortnightly) and the annual amount, subject to the minimum. Most funds let you change the amount year to year by completing a simple form. Ad-hoc lump sums on top of regular payments are also available whenever they’re needed.
The account continues to attract fees the same way an accumulation account does, though often at different rates. Worth checking what your fund charges in pension phase specifically.
Lump sum versus income stream
The lump-sum-or-pension question gets asked in every retirement conversation. Both options are available after 60, and both are tax-free in most cases. The trade-offs:
A lump sum gives you the money in your bank account. It’s flexible (useful for paying down debt, helping family, or large one-off purchases), but the money leaves the tax-advantaged super environment. If you reinvest it outside super, any future earnings will be taxed at your marginal rate. There’s also the practical risk of spending faster than planned without the discipline of a structured income stream.
An income stream (account-based pension) keeps the money in the tax-free environment and provides regular payments, with the minimum drawdown applying each year and the balance exposed to market fluctuations.
Most retirees we work with use both selectively. A typical first-year structure is to take a one-off lump sum to clear remaining debt or fund a long-delayed plan (a renovation, a trip, a contribution to an adult child’s house deposit), then put the rest into an account-based pension as the ongoing income source. The proportions depend on the balance, the debt position, and how much income flexibility you want for the years ahead.
How your super interacts with the Age Pension
From age 67, your super counts in both Centrelink tests:
- Assets test: the entire balance of your account-based pension and any remaining accumulation account is assessable
- Income test: financial assets including super are subject to deeming rates, which were increased on 20 March 2026 to 1.25% (lower rate) and 3.25% (upper rate)
This is why super drawdown strategy and Age Pension entitlements interact in ways that aren’t always obvious. Phil and Dan walked through real worked examples of how the assets test taper plays out at different balance levels on the podcast episode How the Age Pension Really Works. One scenario they covered: how a strategic CGT-aware sale and catch-up contributions reduced a client’s tax bill from $98,000 to $11,000 over a single financial-year boundary.
The mechanic to understand is that as your account-based pension balance reduces through drawdowns, your Age Pension entitlement gradually increases. For most homeowner retirees, the two systems are designed to fit together over the long retirement window.
What happens to your super when you die
This part gets less attention than it should. Super doesn’t automatically form part of your estate. It’s distributed by the fund trustee, either according to a valid binding nomination on your account, or at the trustee’s discretion if no binding nomination is in place.
Two key points:
- Tax treatment varies by recipient. Death benefits paid to a spouse, dependant child, or financial dependant are generally tax-free. Death benefits paid to adult non-dependent children (the most common case) include a taxable component that’s taxed at 15% to 17% in the recipient’s hands.
- A binding nomination overrides the trustee’s discretion. Without one, the trustee makes the call about who receives the benefit. This often turns out fine, but for blended families or estranged relationships, the absence of a binding nomination can produce outcomes the deceased wouldn’t have chosen.
Scott and Phil unpacked this on the podcast episode Super vs Inheritance: How Death and Gifting Impact Your Pension. Phil’s framing: “There’s no right or wrong with estate planning. This is your money. It’s up to you.” The point isn’t that there’s a single correct structure. It’s that the decision should be a decision, not a default.
Where to go next
- How Retirement Works in Australia covers the broader three-pillar system (super, Age Pension, voluntary savings)
- What Is the Retirement Age in Australia? covers preservation age and Age Pension age in detail
- Superannuation vs Retirement: What’s the Difference? clarifies the terminology
- Which Retirement Plan Is Best in Australia? walks through how the pillars combine into a personal plan
FAQs
How does superannuation work when you retire at 60? At 60, you can access your super if you’ve met a condition of release (typically retiring or ceasing an employment arrangement). Most retirees transfer their balance into an account-based pension, which converts the lump sum into a tax-free income stream while keeping the balance invested.
Can I take all my super as a lump sum when I retire? Yes, lump sum withdrawals are available after 60 and are generally tax-free. But the money leaves the tax-advantaged super environment, so any future earnings on it will be taxed at your marginal rate. Most retirees take a smaller lump sum for specific purposes and keep the bulk in an account-based pension.
What is the minimum I have to draw from an account-based pension? The ATO sets minimums based on your age, starting at 4% from age 60 to 64 and scaling up to 14% from age 95. There is no maximum on a standard account-based pension. The minimum applies as an annual percentage of your balance at the start of the financial year.
How much super do I need to retire comfortably? ASFA’s February 2026 benchmarks put the comfortable lump sum at around $630,000 for a single homeowner and $730,000 for a couple. Both assume partial Age Pension eligibility. For a modest retirement, the benchmarks are $110,000 and $120,000 respectively.
Will my super affect my Age Pension? Yes. From age 67, your super counts in both the assets test and the income test. The assets test treats the full balance as an assessable asset; the income test applies deeming rates to it. As your balance reduces through drawdowns over time, your Age Pension entitlement typically increases.
Can I keep working after I access my super? Yes. If you’re using a TTR pension, you can draw up to 10% a year while still working. If you’ve fully met a condition of release after 60, you can return to work afterwards without affecting your access to super. After 65, super is fully accessible regardless of employment status.
What happens to my super when I die? Super doesn’t automatically form part of your estate. It’s paid out by the fund trustee, either according to a valid binding nomination or at the trustee’s discretion. Death benefits to a spouse or dependant are generally tax-free. Death benefits to adult non-dependent children include a taxable component.
Ready to talk through your own super structure?
The mechanics are the same for every Australian, but how you structure your super at and after retirement is specific to your balance, your debt position, your spending needs, and your family circumstances. If you’d like to talk through what your own setup could look like, book a free chat with the Wealthlab team. No pressure, no jargon.
Not ready for a call? The free Wealthlab retirement quiz takes 60 seconds and gives you a snapshot of where you stand.
