Written

For

The

Australian

-

Retirement

income

sweet

spot

and

how

to

achieve

it

Here's a counterintuitive truth about Australian retirement: a couple with $400,000 in super can actually out-spend a couple with $1 million. Sounds mad, doesn't it? But it's the reality of what I call the "retirement sweet spot" – and with the age pension recently bumped up from September 20, it's more compelling than ever.

The full age pension now pays $29,754 for singles and $44,855 for couples. That alone is a decent living for homeowners without rent to worry about. But the real magic happens when you combine a tax-free super pension with the maximum government age pension.

Here's how it works. A homeowner couple can hold up to $470,000 in assessable assets and still qualify for the full age pension. So take a couple with $400,000 in super and $70,000 in cars, cash and contents. Retire at 67, collect the full $44,855 pension (plus the pension concession card worth thousands in discounts), and draw down $28,000–$37,750 from super. That's a retirement income of $72,855 to $82,605 a year.

Compare that to the couple with $1 million in super and $70,000 in lifestyle assets. No age pension. At a 7 per cent return, they generate $70,000. The "poorer" couple wins.

If you're just over the threshold, my advice is blunt: spend it. Renovate. Install solar and battery – the family home is exempt from the assets test, so $20,000 spent there reduces assessable assets AND cuts your power bill. You can also gift $10,000 per year (up to $30,000 over five years) before Centrelink's deprivation rules kick in.

For those with too much in super, consider retiring in your early 60s and drawing down aggressively, so that by 67 you've landed neatly in the sweet spot. Yes, this system rewards spending over saving late in life – but the rules are the rules, and smart retirees play them.