Super Myths That Cost Australians Over 65

Let's be honest, getting your head around the super rules as you head towards the Age Pension age of 67 can feel like a bit of a maze. In fact, some powerful new flexibilities unlock as soon as you turn 65, yet many Australians aren't aware of them. There's a fair bit of confusion out there, and many of the things we assume are true about superannuation are, in fact, common myths.

Getting this stuff right isn't just about ticking boxes; understanding the truth can open up strategies that make a significant difference to your financial wellbeing in retirement. This article is here to bust some of the most persistent myths and reveal a few surprising truths about how you can manage your super far more flexibly and tax-effectively after you turn 65.

Myth: "I have to be retired to start my super pension."

This is one of the biggest misconceptions out there. The fact is, once you turn 65, the old cashing restrictions on your super disappear. This means you can start an Account-Based Pension (ABP) and begin drawing a regular income from it, even if you’re still working full-time or part-time.

This is a powerful strategy. It allows you to keep a separate super accumulation account active to receive any ongoing employer contributions, while you draw a regular income from your new tax-effective pension account. This dual-account strategy means you can use your tax-free pension to supplement your income, potentially reducing your work hours, while your employer’s compulsory contributions continue to build your nest egg for full retirement.

Truth: The tax difference between super phases is a game-changer.

Here’s where it gets really interesting. The tax treatment between a standard super accumulation account and an Account-Based Pension is night and day. Once your money is in an ABP and you begin taking payments from it (known as the 'drawdown phase'), all investment earnings and capital gains are completely tax-free.

Compare that to an accumulation account, where your investment earnings can be taxed at up to 15% and capital gains at 10%. To see what this means in real dollars, let's look at an example. Jane is 67 and has $500,000 in super. If she leaves it in the accumulation phase, her investment earnings could generate a tax bill of around $3,750 every year. By simply moving that same money into an ABP, that tax bill becomes zero. That's an extra $3,750 being reinvested and compounded each year, a difference that can add tens of thousands of dollars to your retirement balance over time.

Myth: "I have to move all my super over, and I can never go back."

This is another common belief that holds people back. You absolutely do not have to move your entire super balance into a pension account at once. In fact, doing a partial rollover—moving just a portion of your funds into an ABP—is a savvy strategy for several reasons. You might keep funds in accumulation to maintain life, TPD, or income protection insurance, or to accept ongoing employer contributions. A partial rollover also helps you manage your finances by limiting your mandatory minimum withdrawal to only what you need for cash flow, allowing the rest to remain in super to grow.

Here's another high-impact strategy: if you have a spouse who is under the Age Pension age, keeping their funds in an accumulation account can be a massive advantage. Their super balance won't be counted in your Age Pension asset test, which could significantly increase your Centrelink entitlements.

Furthermore, it’s not a one-way door. If your circumstances change, you can roll funds from your ABP back into an accumulation account. This can be useful if you receive a large contribution and want to consolidate all your funds before starting a new, larger ABP. This flexibility puts you firmly in control.

Myth: "I'm too old to add more money to my super."

Retirement doesn't always mean a hard stop to growing your savings. The rules generally allow you to continue making contributions to your super right up until you turn 75.

This is an incredibly valuable and often-overlooked opportunity. You might find yourself in a position to contribute after returning to work, receiving an inheritance, selling an asset, or even through spousal contributions. Keeping the door open to growing your super in a tax-effective environment well past the traditional retirement age is a powerful tool for financial security.

Conclusion: More Flexibility Than You Think

As you can see, the rules governing your superannuation once you pass age 65 offer far more flexibility and strategic potential than many people realise. Far from being a rigid system, it’s designed to be adapted to your personal circumstances, whether you’re still working, fully retired, or somewhere in between.

It leaves you with an important question to consider:

Have you considered whether keeping part of your super in accumulation phase could benefit your Age Pension or investment returns?

To discuss your personal situation, give us a call on 0413 892 531.

Sean Sullivan is an Authorised Representative of Vivid Financial Planning Pty Ltd, and holds an Australian Financial Services License #478937.

The information on this Website is general in nature and does not take into account your personal situation. You should consider whether the information is appropriate for your needs and, where appropriate, seek professional advice from a financial adviser.