Retirement planning is really one question broken into three: how much income will you need each year, where will that income come from, and how do you turn a lump sum into a paycheque that lasts the rest of your life? In Australia we answer those questions with a three-pillar system — compulsory superannuation, the means-tested Age Pension, and your own savings and investments outside super. Get the interaction between those three right and a comfortable retirement is well within reach for most people.
This is the hub page for everything retirement on Cockatoo. It links across to our other four wealth pillars — superannuation, self-managed super funds, investing in shares and capital gains tax — and down to the detailed guides that sit under it. Use it as your map.
Australia’s three-pillar retirement income system
Most Australians fund retirement from a blend of three sources, and good planning is mostly about getting the mix right.
1. Superannuation. Compulsory employer contributions (the Superannuation Guarantee, now 12% of wages, with employers moving to payday super from 1 July 2026) build a balance across your working life. In retirement you convert that balance into an income stream. If you’re still working out how super itself operates, start with superannuation explained.
2. The Age Pension. A means-tested safety net paid by Centrelink from age 67 (subject to residency, income and assets tests). Even many people with healthy super balances qualify for a part pension. See our full guide to Age Pension eligibility and the assets test.
3. Personal savings and investments. Money outside super — shares, ETFs, investment property, cash — plus any inheritance or business sale proceeds. This is where dividend investing and franking credits can add tax-effective income, and where capital gains tax planning matters.
The art of retirement planning is layering these so they complement each other: super and personal investments provide the bulk of income early, and the Age Pension tops up (and increasingly kicks in) as your assessable assets fall over time.
Setting your retirement income target
Before you can tell whether you’re on track, you need a number — the annual income you want to spend. The most widely used benchmark is the ASFA Retirement Standard. For a homeowner retiring at 67, the February 2026 figures for a comfortable lifestyle are:
| Household | Comfortable annual spend | Lump sum needed at 67 |
|---|---|---|
| Single | $54,837 | $630,000 |
| Couple | $77,375 | $730,000 |
Those lump sums assume you also draw a part Age Pension — which is why they’re lower than people expect. We break the benchmark down in the ASFA Retirement Standard 2026 guide, and translate it into a personal number in how much money you need to retire in Australia. If you’d rather think in terms of a super balance target specifically, see how much super do I need to retire.
A quick way to sense-check your own target: estimate your annual spending in today’s dollars, subtract any expected part Age Pension, and the remainder is what your own capital must generate.
The clusters under this pillar
This pillar connects to eight detailed guides. Here’s how each fits your plan:
- How much money do you need to retire in Australia? — building your annual income “number” from all sources, and income vs lump-sum thinking.
- ASFA Retirement Standard 2026 — the modest vs comfortable benchmarks and the latest dollar figures.
- Division 296: the $3 million super tax — the new extra tax on very large super balances, now law and applying from 1 July 2026.
- Age Pension eligibility & assets test — who qualifies, how the income and assets tests and deeming work.
- Account-based pensions & income streams — converting super into a tax-effective pension and the minimum drawdown rules.
- Transition to retirement (TTR) strategy — accessing super while still working to ease into retirement.
- Self-funded retiree: what it means — funding retirement without the Age Pension, and the role of franking credit refunds.
- Annuities in Australia — guaranteed income products that hedge longevity risk.
Drawing down: turning a balance into a paycheque
Accumulating super is only half the job; the drawdown phase is where plans succeed or fail. When you retire and meet a condition of release, you typically move your super into an account-based pension. Earnings in that pension are tax-free, and for anyone 60 or over the payments are tax-free too. The government sets minimum drawdown rates by age (4% at 65–74, rising with age), so you must take at least that much each year.
There’s a ceiling on how much you can move into the tax-free retirement phase — the general transfer balance cap, rising from $2.0 million to $2.1 million in 2026-27. Amounts above the cap stay in accumulation (taxed at 15% on earnings) or are withdrawn.
Three drawdown decisions matter most:
- How much to withdraw. Taking the minimum preserves capital and keeps more in the tax-free environment; taking more funds a better lifestyle but risks running short. Many retirees use a “bucket” approach — cash for the next few years, growth assets for the long term.
- Sequencing risk. A market fall in your first few years of retirement does disproportionate damage because you’re selling assets to fund income. Holding a cash buffer helps you avoid selling into a downturn.
- Longevity. A 67-year-old may live 25+ years. Products like annuities can guarantee income for life and specifically hedge the risk of outliving your money.
Where the other pillars connect
Retirement planning touches every other topic in this hub:
- Contributions strategy — before you retire, salary sacrifice and the higher contribution caps for 2026-27 are your main levers to grow the balance. The concessional cap rises to $32,500 and the non-concessional cap to $130,000 from 1 July 2026.
- SMSFs — if you run a self-managed super fund, the same drawdown rules apply in SMSF pension phase.
- Investing — the income your capital produces depends on your asset mix; see how to invest in shares.
- Tax — selling assets to fund retirement can trigger capital gains tax, so timing disposals matters.
Common pitfalls
- Ignoring the Age Pension. Assuming you won’t qualify means missing income and concession cards you’re entitled to.
- Planning only to retirement, not through it. The drawdown phase can last as long as your career did.
- Forgetting inflation. A fixed dollar income buys less each year; build in indexation.
- Over-conservative investing. Holding everything in cash can mean running out of money as prices rise over a long retirement.
Related reading
Work outwards from here: pin down your number with how much money you need to retire and the ASFA Standard, understand the safety net via the Age Pension guide, and plan your income machine with account-based pensions and annuities.
This article is general information only and not financial or tax advice; consider your own circumstances and speak to a licensed adviser or the ATO before acting.