I had a couple in my office last month – let’s call them Robert and Jane – who told me their retirement goal:
“We want to be completely self-funded. No Age Pension. We don’t want to rely on the government.”
Noble sentiment. Terrible strategy.
Robert and Jane are 59 and 61. Combined super: $780,000. Paid-off Balmain home. They’re on track to qualify for about $22,000/year in part Age Pension.
But they don’t want it.
So they’re planning to work until 67 to build their super to $1.1M+ so they can be “fully independent.”
Here’s the problem: They’re sacrificing 5-6 years of their 60s (the healthiest, most active retirement years) to avoid taking an entitlement they’ve earned through 40 years of tax.
This is financial martyrdom. And it’s surprisingly common among Balmain locals.
So let me answer the question straight: Can you retire on super alone?
Yes. But should you? That’s a different question.
“How the Age Pension Actually Works”
Let’s start with the numbers.
To retire on super alone (zero Age Pension), you need enough super to generate all your retirement income for 25-30 years.
Financial planners use a “safe withdrawal rate” – the percentage you can draw annually without running out.
Conservative estimate: 4% per year
Moderate estimate: 5% per year
Aggressive estimate: 6% per year (risky for 30-year retirement)
Let’s use 5% as the benchmark.
At 5% withdrawal rate:
$500,000 super = $25,000/year income
$700,000 super = $35,000/year income
$900,000 super = $45,000/year income
$1,200,000 super = $60,000/year income
$1,500,000 super = $75,000/year income
Based on real Balmain retirement costs:
Frugal lifestyle ($52,000-$58,000/year):
Super needed: $1,040,000-$1,160,000
Comfortable lifestyle ($62,000-$72,000/year):
Super needed: $1,240,000-$1,440,000
Generous lifestyle ($78,000-$95,000/year):
Super needed: $1,560,000-$1,900,000
These are BIG numbers.
And here’s the kicker: Most Balmain pre-retirees have $600,000-$900,000 in super.
Not $1.2M-$1.9M.
“What $600,000 in Super Actually Buys You”
Now let’s look at what happens when you DON’T reject Age Pension.
Target income: $65,000/year
Super balance: $650,000
Super income (5%): $32,500/year
Age Pension (part): $28,000/year
Total income: $60,500/year
Result: You’re $4,500/year short, but easily manageable with minor adjustments.
To achieve the same $65,000/year WITHOUT Age Pension:
Super needed: $1,300,000
Extra super required: $650,000
That’s an extra $650,000 you need to accumulate – roughly 5-8 more years of work for most people.
Target income: $55,000/year
Super balance: $520,000
Super income (5%): $26,000/year
Age Pension (part): $34,000/year
Total income: $60,000/year
Result: You’ve got a $5,000/year surplus.
To achieve the same WITHOUT Age Pension:
Super needed: $1,100,000
Extra super required: $580,000
Again: 5-8 years of additional work.
I hear this constantly.
“I’ve been independent my whole life. I don’t want to be dependent on government handouts.”
Here’s the reality check:
Age Pension isn’t welfare. It’s not charity. It’s not a handout.
It’s an entitlement you’ve earned through 40 years of paying income tax, GST, and every other tax this country collects.
You’ve already paid for it. Taking it isn’t dependence – it’s getting what you paid for.
Refusing Age Pension is like refusing a tax refund because you “don’t want government handouts.”
It’s illogical.
This fear is overblown.
Yes, governments tinker with eligibility. Yes, they’ve raised the age from 65 to 67. Yes, they might tighten means testing.
But the Age Pension isn’t going anywhere.
Why? Politics.
The largest voting bloc in Australia is retirees and near-retirees. Any government that tries to abolish Age Pension would be destroyed at the ballot box.
Will it stay exactly as it is? Probably not.
Will it exist in some form when you’re 70, 80, 90? Almost certainly.
Planning your retirement on the assumption it won’t exist is overly conservative to the point of self-harm.
Fair. Centrelink can be painful.
But you’re talking about tolerating a few hours of bureaucracy in exchange for $250,000-$500,000 over your retirement.
That’s $50,000-$100,000 per hour of Centrelink frustration.
I’d endure a lot worse for that kind of return.
This is the only legitimate reason to avoid Age Pension.
If your goal is to preserve maximum super to pass to your kids, then yes – staying fully self-funded makes sense.
But be honest about the trade-off:
You’re working 3-5 years longer and living more frugally in retirement so your adult children can inherit an extra $300,000-$500,000.
If that’s your priority, fine. But own the choice.
Most people would rather retire sooner and enjoy their 60s.
Let’s talk about what you’re actually giving up.
To accumulate an extra $500,000-$700,000 in super takes 5-8 years for most people.
That’s 5-8 years of your early 60s spent working instead of retired.
Your 60s are different from your 70s. You’re healthier. More mobile. More energetic.
Working until 67 instead of 62 to avoid Age Pension means giving up five of your healthiest retirement years.
You can’t buy those years back.
Even a part Age Pension of $15,000-$25,000/year is worth $375,000-$625,000 over 25 years.
Refusing it means you need to generate that income from super instead.
To replace $20,000/year Age Pension, you need an extra $400,000 in super (at 5% withdrawal).
That’s a massive opportunity cost.
If you retire on super alone with inadequate balance, you’ll spend retirement anxious about money.
“Can we afford this holiday?”
“Should we help the grandkids with that?”
“What if we live to 95 and run out?”
Constant low-level financial stress.
Meanwhile, someone with less super BUT Age Pension income has stability and peace of mind.
There ARE situations where self-funded retirement is the right choice:
If you’ve got $1.5M-$2M+ in super, you don’t need Age Pension.
You can generate $75,000-$100,000/year comfortably without touching government support.
At that level, the administrative hassle of dealing with Centrelink probably isn’t worth the small part pension you’d receive anyway.
Investment properties generating $30,000+/year in rental income
Dividends from share portfolio outside super
Part-time consulting work you enjoy
If you’ve got substantial non-super income, you might not need Age Pension.
If leaving maximum inheritance to your kids trumps everything else (including your own retirement lifestyle and timing), then staying fully self-funded preserves more capital.
But again: own this choice. Don’t pretend it’s about “independence.”
Here’s what most savvy Balmain retirees do:
They retire with $600,000-$900,000 in super PLUS part Age Pension eligibility.
Early retirement (age 60-67): Live primarily off super, minimal/no Age Pension
Mid retirement (age 67-75): Super + increasing Age Pension as assets decline
Late retirement (age 75+): Reduced super + higher Age Pension
This approach:
✓ Lets you retire sooner
✓ Provides income stability
✓ Reduces longevity risk (running out of money)
✓ Maximizes government support you’ve already paid for
This income-focused retirement strategy is the foundation of smart planning.
David and Maria, both 62, Balmain homeowners
Combined super at retirement: $720,000
Age 62-67 (pre Age Pension age):
Age 67-77:
Age 77-90:
Result: They retired at 62, enjoyed their 60s fully, and have stable income through their 80s and 90s.
If they’d insisted on being fully self-funded, they’d have needed $1.3M in super and worked until 68.
One argument for higher super balances: “I’ll earn 7-8% returns, so I don’t need as much.”
Be very careful with this logic.
If you retire right before a market crash (2008, 2020), your super gets hit hard early.
Example:
You retire with $800,000, planning to draw $50,000/year.
Year 1: Market crashes 25%. Your super drops to $600,000.
You still need to draw $50,000 for living expenses.
Year 2: Super is now $550,000, and the market is recovering slowly.
You’ve locked in losses by withdrawing during the downturn.
This is called “sequence of returns risk” – the order of your returns matters enormously in retirement.
Conservative planning assumes 4-5% returns, not 7-8%.
Here’s where Age Pension becomes incredibly valuable:
If markets crash, you can reduce super withdrawals and lean more on Age Pension.
This protects your super during downturns and lets it recover.
Self-funded retirees don’t have this buffer. They’re forced to sell in downturns to cover expenses.
Stop asking: “Can I retire on super alone?”
Start asking: “What’s the smartest way to use ALL my retirement resources?”
Those resources include:
Using all of them strategically beats trying to be a financial martyr.
“The Real Cost of Retirement in Balmain”
Can you retire on super alone?
Yes – if you have $1.2M-$1.9M in super (depending on lifestyle).
Should you reject Age Pension for ideological reasons?
No – unless you value “independence” more than 5 extra years of your 60s and hundreds of thousands of dollars.
The smartest strategy?
Retire with adequate super ($600,000-$900,000), claim the part Age Pension you’re entitled to, and enjoy a comfortable retirement without working yourself into the ground.
You’ve paid taxes for 40 years. The Age Pension is yours. Take it.
Should you aim for self-funded retirement or accept Age Pension? The answer depends on your super, your lifestyle, and your priorities.
The One Page Financial Plan models both scenarios and shows you the real trade-offs.
For $660 (inc GST), you’ll discover:
✓ How much super you’d need to be fully self-funded
✓ What you’d get with super + Age Pension instead
✓ The real cost (in years and dollars) of rejecting Age Pension
✓ Which strategy actually makes sense for YOU
✓ 100% satisfaction guaranteed
📧 Email: adam@suncow.com.au
📞 Phone: 0418 785 200
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