5 Retirement plan decisions to lock in before you retire

Key take aways

• Strategic superannuation contributions in your final 5 working years can add $50,000-$100,000 to your retirement balance through compound growth and tax benefits
• Poor investment timing during retirement transition could leave you $150,000 worse off over a decade, even with identical average returns
• Timing major purchases and asset sales before applying for Age Pension can strategically increase your pension entitlement

 

You’ve spent decades building your career and watching your superannuation grow. Now, with retirement just five years away, there’s one big question about your retirement plan keeps surfacing: “have you done enough?”.

Research suggests that around four in five older Australians feel either financially comfortable or at least getting by on their current income in retirement. That sounds reassuring, until you realise that averages hide an important reality. The five years before you retire are the most critical planning period of your entire career, where a handful of strategic decisions can have the biggest impact on your personal sense of security.

The challenge isn’t that pre-retirees lack financial resources. Most people approaching retirement have accumulated substantial superannuation and other assets.

The real issue is uncertainty about whether those resources will actually support the lifestyle they’ve envisioned, and confusion about the specific steps needed to plan for retirement effectively. Small mistakes or missed opportunities during these final five years can mean the difference between financial worry and genuine peace of mind.

 

Understanding your financial foundation

Before diving into the five critical retirement plan decisions, you need clarity on where you stand. Most pre-retirees have a general sense of their financial position but lack the precise numbers that enable confident decision-making.

According to the ASFA Retirement Standard, a single person needs about $595,000 in super at age 67 for a ‘comfortable’ retirement, assuming they own their home and receive some Age Pension. But benchmarks only tell part of the story. Understanding exactly how much you need to retire comfortably requires personalized calculations based on your specific circumstances.

More important than comparing yourself to industry standards is defining what retirement actually looks like for you. Will you stay in your current home, downsize to release equity, or relocate to be closer to family? Do you envision frequent travel, perhaps a European trip every few years, or are you content with occasional domestic holidays? Will you pursue expensive hobbies like boating or golf club memberships, or focus on lower-cost activities like gardening and volunteering?

These aren’t abstract questions. The difference between a modest retirement lifestyle and a comfortable one can be $25,000 annually or more.

Once you’ve defined your retirement vision, you can work backwards to calculate the income required to support it. The clearer your vision, the more confidently you can make the five critical decisions ahead.

 

The 5 critical retirement planning decisions

1. Maximising your superannuation in the final stretch

With five years until retirement, strategic superannuation contributions can add $50,000 to $100,000 to your final balance through compound growth and tax benefits that are available to pre-retirees that won’t exist once you stop working. This is a critical part of any solid retirement plan.

You can make (before tax) concessional contributions, including employer super, up to the annual cap which is currently $30,000 (from 1 July 2024). For someone earning $100,000 who salary sacrifices an extra $10,000 a year, the contribution is generally taxed at 15% instead of their marginal income tax rate of 32%, delivering a tax saving of $1,700 a year while boosting retirement savings. Over five years, with employer contributions and investment growth, that strategy could add tens of thousands of dollars to their super balance. Working with a financial adviser ensures you maximise these opportunities within your specific tax situation and contribution limits.

Non-concessional contributions allow you to add up to the annual after tax cap of $120,000 (for the 2024/25 financial year). If you are under 75 and meet the eligibility rules, the bring forward rule lets you contribute up to three years’ worth of caps in a single year (currently $360,000), which can be particularly valuable if you receive an inheritance, sell a property or have other windfall income in your final working years.

2. Investment strategy transition for pre-retirement

Your investment approach needs to evolve as you move from pure accumulation to protecting the income you’ll actually live on. Many retirement plans fail because they stay 100% in growth assets or swing too far into cash. These are both common mistakes that can either magnify losses at the wrong time or leave your money trailing inflation across a 20–30 year retirement.

Sequencing risk is the danger that markets fall just as you start drawing on your super, locking in losses and shrinking the base you need for future growth. In some scenarios, the retiree who suffers early losses can end up more than $100,000 worse off over a decade, even if average returns are the same. This sequence of returns risk becomes critical as you approach and enter retirement.

Many pre-retirees in their late 50s sit in “balanced” or “growth” style options that roughly equate to 70-90% in growth assets, then gradually move toward about 50-70% growth through their 60s so they can keep growing their money while dialling down the impact of big drawdowns. The right mix for your retirement plan still comes back to your risk tolerance and how much flexibility you have in your retirement spending.

3.Debt elimination strategy

Entering retirement debt-free provides tremendous peace of mind and reduces your required retirement income by eliminating debt servicing costs. However, the “eliminate all debt” advice isn’t universally correct as some retirement plan debt elimination strategies are smarter than others.

Start with high-interest consumer debt. Credit cards charging 18-24% interest rates should be your first target, followed by personal loans at 8-15%. These debts provide no tax benefits and generate no investment returns, making them clear candidates for immediate elimination.

Your mortgage presents a more nuanced decision. For most pre-retirees, eliminating the mortgage before retirement makes sense. Giving you the confidence and peace of mind knowing that your housing is secure regardless of market conditions or pension changes. That confidence has real value beyond the numbers on a spreadsheet.

Investment property loans require different analysis because the interest is tax-deductible. If your property generates positive cash flow and provides diversification, maintaining that debt might make sense. However, if you’re planning to sell the property eventually, doing so after retirement can be strategically advantageous when your taxable income is lower, particularly before age 67 so you can still make concessional contributions without meeting the work test and offset capital gains through your super. Strategic tax planning advice can help you time these transactions optimally.

4. Healthcare and insurance recalibration

Healthcare costs typically increase in retirement, with Australians spending an average of $1,586 annually on out-of-pocket medical expenses. The decisions you make about health insurance and other coverage in these final working years set the foundation for your retirement plan.

If you don’t currently have private health insurance and you’re considering it for retirement, understand the Lifetime Health Cover loading. For every year after age 31 that you delay taking out hospital cover, you pay a 2% loading for ten years once you do join. Someone joining at age 60 faces a 60% loading on top of their premium.

Your insurance requirements change dramatically as you approach retirement. Life insurance that made sense when you had young children and a large mortgage may be excessive once your kids are independent and your home is nearly paid off. Conversely, Total and Permanent Disability (TPD) insurance often remains valuable until retirement because it protects your super balance if you can’t work.

Healthcare and aged care can become some of the largest and least predictable costs in retirement, so they deserve a deliberate plan.

While it is uncomfortable to think about needing formal care, home care packages can involve total funding and fees ranging from around $10,000 a year at lower levels to well over $50,000 a year at higher care levels, depending on your needs and income assessment. Residential aged care homes typically start with a basic daily fee set by the government at 85% of the single basic Age Pension, which currently works out to about $65.50 per day, or roughly $24,000 per year, before any means tested care fees or accommodation costs are added. Knowing the potential scale of these expenses helps you build them into your retirement plans rather than being forced into rushed decisions later.

5. Age pension optimisation and government benefits

The age pension can form a crucial part of your retirement plan, but eligibility depends on complex asset and income tests. The decisions you make about asset structuring and timing in these final working years can significantly impact your pension entitlement.

The age pension is means tested and for 2025-26, full pension eligibility for singles requires assets under $321,500 (excluding your home) and income under $218 per fortnight. Couples need combined assets under $481,500 and income under $380 per fortnight.

Your principal residence is exempt from the assets test, which makes it one of the most valuable age pension planning tools available. Here’s a decision many pre-retirees miss: the timing of major purchases and asset restructuring relative to age pension applications. Investing in home improvements, paying down your mortgage, or buying that caravan or boat before you apply can be strategically advantageous. These actions reduce your assessable assets while providing lifestyle benefits or improving your living environment, potentially increasing your pension entitlement. Note: lifestyle assets such as cars, boats and caravans are still assessed by Centrelink, however, their value often depreciates once you make the purchase.

Similarly, if you own a rental property and plan to sell it eventually, consider completing that sale before applying for the age pension. Investment properties count toward the assets test, and strategic timing of the sale, particularly if you plan to spend the proceeds on exempt assets or lifestyle expenses, can optimise your pension position.

The gifting rules allow you to give away $10,000 annually or $30,000 over five years without affecting your pension. This can be valuable for helping children or grandchildren while potentially increasing your pension entitlement.

When you apply for age pension matters. You can claim from your age pension age (currently 67). Some pre-retirees benefit from delaying their claim to first restructure assets optimally, while others maximise their benefit by applying as soon as eligible. Our specialised Age Pension advice helps you navigate these complex decisions to maximise your entitlements.

Your superannuation timing sits alongside this. You can generally access super once you reach your preservation age (age 60) and meet the conditions of release.

Beyond the age pension itself, the Commonwealth Seniors Health Card offers cheaper prescription medicines and some medical concessions to eligible older Australians who meet an income test, even if they do not receive the pension. The Pensioner Concession Card, available to age pension recipients and some other payment recipients, can deliver discounts on utilities, council rates, public transport and a range of state and local services.