The Sweet Spot Why You Only Need $253k In Super To Retire

How to combine savings and the age pension to maximise your retirement income

- Susan Hely

There is a winning number that pre-retirees and retirees need to know. We call it “the sweet spot” – the point where superannuation combines with the full age pension.

The sweet spot has been harder to hit since the federal government tightened the assets test taper rate in January 2017.

Combining the age pension with super is harder for homeowning couples with super, plus other assets, above $401,500, which is the cut-off point for the full pension. With this amount in assets, their pension shrinks until it cuts out at $880,500. But the catch is this: their income from super isn’t high enough to compensate for the loss of the pension.

They’re not necessarily wealthy. Many middle-income earners, who have been diligently building up their savings through their working lives, are shocked to find out that their super is a drag on their retirement income because of the assets means test.

In fact, people with less in super who qualify for a full age pension can do better.

For example, a homeowning couple with a super of more than $401,500 will be worse off in terms of income than a couple with $386,500 who qualify for the full age pension of $37,341. The couple with the higher balance lose $3 a fortnight in the age pension for every $1000 above the assets threshold. That is $78 a year or 7.8% of their incremental assets. In the current interest-rate environment, their savings can’t earn nearly enough to offset that penalty.