When you retire, most Australians move super into an account-based pension. The balance stays invested and keeps earning returns — tax-free in pension phase — while you draw a regular income. The question is whether the returns can outpace the withdrawals.
- 1. Year-by-year simulation. Each year the model takes your drawdown at the start of the year, then grows the remaining balance at your chosen return. It runs from your retirement age to age 100.
- 2. Income indexed to inflation. The income you enter is in today's dollars. Each year it is increased by your inflation assumption so your purchasing power stays constant — a $50,000 lifestyle today needs about $64,000 in 10 years at 2.5% CPI.
- 3. Minimum drawdowns are compulsory. The government requires account-based pensions to pay out a minimum percentage of the balance each year, rising with age (see table). If your chosen income is below the minimum, the model draws the minimum instead — you can always spend or reinvest the excess outside super.
- 4. Tax-free earnings — up to a cap. Investment earnings in pension phase are tax-free, but only balances up to the transfer balance cap can be moved into pension phase — $2.0 million for 2025–26, indexed to $2.1 million from 1 July 2026. Amounts above the cap stay in accumulation phase, where earnings are taxed at 15%.
- 5. The Age Pension safety net. This model deliberately excludes the Age Pension. As your balance falls, a part or full Age Pension typically cuts in and slows the drawdown — check the Age Pension estimator for your likely entitlement.
This is a simplified planning model, not a prediction. Real returns vary year to year (sequence-of-returns risk matters most early in retirement), fees differ by fund, and spending rarely tracks CPI exactly. It is general information only, not financial advice.