Retirement
Retirement trap hurting saving Aussies
Australians are being warned that they will need half a million dollars to escape the “retirement trap” of a reduced pension due to assets meeting certain thresholds, according to an industry expert.
Retirement trap hurting saving Aussies
Australians are being warned that they will need half a million dollars to escape the “retirement trap” of a reduced pension due to assets meeting certain thresholds, according to an industry expert.
According to BetaShares, retirees who lift their savings to between $350,000- $600,000 may ironically see their income diminish.
BetaShares senior investment specialist Dr Roger Cohen said, “Common wisdom tells us that accumulating more savings through our working lives should result in higher income in our retirement years.”
“However, our analysis shows that, for certain people, under the current system, accumulating more money can actually produce the reverse.”
The current retirement system in Australia sees retirees drawing income from a combination of superannuation, the Age Pension and external assets.
The pension is means-tested, with the level of entitlement calculated using an income test and an assets test. These entitlement levels and associated reduction in the pensions are the primary drivers behind the “trap”.
More specifically, for an individual, there is an income range between $174 and $2,026 per fortnight, where for every additional dollar earned, the pension is reduced by 50 cents. This effectively halves the value of additional earnings for retirees in this range.
“For a retiree caught in the ‘retirement trap’, additional assets are better off spent, or, if they are invested, must generate returns that are well in excess of 7.8 per cent per annum to exceed the pension entitlements that are lost,” Dr Cohen said.
“Unfortunately, such investments generally entail taking risk above levels, which are commonly recommended for retirees.”
“The transition from full entitlements to the Age Pension to no entitlements needs to be smoother. It is certainly an undesirable situation that for some people, more is not necessarily more,” he added.
“Without considering the eventual policy changes from the Retirement Income Review, our research shows that people in retirement can only escape the ‘retirement trap’ if they accumulate an asset base well over half a million dollars.”
nestegg has previously reported how Australia could be heading for a retirement crisis.
RELATED ARTICLES
About the author
About the author
Retirement Planning
Retirement happiness on the rise, but cost-of-living worries cloud confidence
Australians aged 60 and over are generally positive about their retirement, but concerns about the rising cost of living continue to impact their lifestyle and financial security, according to the ...Read more
Retirement Planning
Australia's retirement system nears tipping point as withdrawals surpass contributions
State Street has unveiled a significant new research series, "Reimagining Retirement," which highlights a critical juncture for Australia's retirement system. The study, released on 1 April 2026, ...Read more
Retirement Planning
Online wills initiative aims to boost superannuation and retirement engagement
In a bid to increase engagement with superannuation and retirement planning, Aware Super has expanded its online wills service, following a successful pilot program. The initiative, launched in ...Read more
Retirement Planning
New digital platform revolutionises retirement planning for Aware Super members
A groundbreaking digital platform by Aware Super is transforming the way retirees plan and manage their pensions, with significant results already seen in the pilot phase. The tool, named Retirement ...Read more
Retirement Planning
The retirement mortgage squeeze: how one bank turned a demographic risk into a strategic edge
An increasing share of Australians are entering their 60s still paying off mortgages, just as living costs and interest charges stay stubbornly high. For banks, super funds, retailers and ...Read more
Retirement Planning
The retirement mortgage crunch: what it means for banks, retailers and policy in Australia
A growing share of Australians are carrying mortgages into their 60s and beyond, colliding with persistent cost-of-living pressures and a “slow grind” macro outlook. This isn’t just a social story; it ...Read more
Retirement Planning
Majority of Australians still unsure about their retirement prospects
A recent survey conducted by MFS Investment Management® has shed light on the ongoing uncertainty faced by many Australians regarding their retirement plans. Despite a slight increase in confidence ...Read more
Retirement Planning
Wage growth steadies as businesses navigate economic challenges
In a sign that the Australian labour market may be finding equilibrium, wage growth has stabilised this quarter, according to Employment Hero's latest data. This development comes as employers ...Read more
Retirement Planning
Retirement happiness on the rise, but cost-of-living worries cloud confidence
Australians aged 60 and over are generally positive about their retirement, but concerns about the rising cost of living continue to impact their lifestyle and financial security, according to the ...Read more
Retirement Planning
Australia's retirement system nears tipping point as withdrawals surpass contributions
State Street has unveiled a significant new research series, "Reimagining Retirement," which highlights a critical juncture for Australia's retirement system. The study, released on 1 April 2026, ...Read more
Retirement Planning
Online wills initiative aims to boost superannuation and retirement engagement
In a bid to increase engagement with superannuation and retirement planning, Aware Super has expanded its online wills service, following a successful pilot program. The initiative, launched in ...Read more
Retirement Planning
New digital platform revolutionises retirement planning for Aware Super members
A groundbreaking digital platform by Aware Super is transforming the way retirees plan and manage their pensions, with significant results already seen in the pilot phase. The tool, named Retirement ...Read more
Retirement Planning
The retirement mortgage squeeze: how one bank turned a demographic risk into a strategic edge
An increasing share of Australians are entering their 60s still paying off mortgages, just as living costs and interest charges stay stubbornly high. For banks, super funds, retailers and ...Read more
Retirement Planning
The retirement mortgage crunch: what it means for banks, retailers and policy in Australia
A growing share of Australians are carrying mortgages into their 60s and beyond, colliding with persistent cost-of-living pressures and a “slow grind” macro outlook. This isn’t just a social story; it ...Read more
Retirement Planning
Majority of Australians still unsure about their retirement prospects
A recent survey conducted by MFS Investment Management® has shed light on the ongoing uncertainty faced by many Australians regarding their retirement plans. Despite a slight increase in confidence ...Read more
Retirement Planning
Wage growth steadies as businesses navigate economic challenges
In a sign that the Australian labour market may be finding equilibrium, wage growth has stabilised this quarter, according to Employment Hero's latest data. This development comes as employers ...Read more
