An account-based pension is one of the most flexible and tax-effective retirement income structures available to Australians. For many retirees, it forms the backbone of their retirement plan. However, despite its popularity, account-based pensions are often misunderstood and poorly implemented. Many retirees make decisions based on assumptions, incomplete information, or well-intentioned but flawed advice. When navigating retirement planning in Australia, it is crucial to seek advice from a reputable firm with an experienced team to ensure your financial future is secure.
The consequences are not always obvious at first. In many cases, mistakes only become apparent years later — through reduced income, unnecessary tax, higher stress, or missed opportunities. This article outlines the most common account-based pension mistakes we see, explains why they occur, and — most importantly — how they can be avoided with proper retirement planning advice in Adelaide, investment advice, and superannuation advice. Ongoing advising from a dedicated team ensures all our questions are addressed throughout the retirement journey, providing comprehensive support and peace of mind.
Introduction to Account-Based Pensions
An account-based pension is a flexible retirement income stream that allows you to draw regular payments from your superannuation fund once you reach preservation age and retire. This structure is designed to help you convert your super savings into a steady income, supporting your lifestyle and financial goals throughout retirement.
Mistake 1: Starting an Account-Based Pension Too Early
One of the most common misconceptions is that you should start an account-based pension as soon as you are eligible. While eligibility is important, timing matters. Aligning pension commencement with the right stage of life is crucial for achieving optimal retirement outcomes.
Starting too early can:
reduce flexibility
trigger minimum drawdown requirements sooner than necessary
limit contribution strategies
lock in tax components prematurely
In some cases, delaying the commencement of a pension — even after retirement — can preserve optionality and improve long-term outcomes. This is where tailored retirement planning advice in Adelaide adds real value by helping clients align their pension commencement with their broader financial goals, lifestyle, and the specific stage they are in.
Mistake 2: Assuming an Account-Based Pension Is “Set and Forget”
Many retirees assume that once a pension is set up, the job is done. In reality, an account-based pension requires ongoing management.
Failing to review a pension regularly can lead to:
asset allocations drifting out of alignment with risk tolerance
risk levels becoming inappropriate for changing circumstances
missed opportunities to adjust strategy in response to market conditions
declining sustainability of income over time
Retirement can last 25–30 years. A static strategy rarely remains appropriate for that long. Regular reviews with a financial planner ensure your investment options and withdrawal strategy remain aligned with your retirement goals, and assist you in adapting to changing circumstances as they arise.
Mistake 3: Taking Too Much (or Too Little) Income
Another common issue is poorly calibrated withdrawals. It’s important to understand how much to pay yourself from your pension to ensure you maintain your desired lifestyle while making your retirement savings last.
Taking Too Much
Drawing too much income early in retirement can:
accelerate balance depletion
increase longevity risk
reduce flexibility later in life
Taking Too Little
On the other hand, withdrawing too little may:
unnecessarily constrain lifestyle
lead to excess balances late in life
reduce enjoyment of retirement
The goal is not to maximise withdrawals or minimise them, but to align income with lifestyle needs and sustainability. Expert advice can help you balance income needs with investment growth to achieve financial independence and peace of mind.
Mistake 4: Ignoring Investment Strategy After Retirement
A persistent myth is that retirement means moving entirely to “safe” investments or assuming that owning a home is always the best financial choice. In reality: Renting vs Owning a Home in Retirement: Financial Pros and Cons for Your Retirement Years
retirement portfolios often still need growth to outpace inflation, making investing for long-term security essential
income sustainability depends on long-term returns
excessive conservatism can increase the risk of running out of money
Diversification is a key principle in investment strategies for retirement, helping to manage risk and support sustainable income.
An account-based pension does not eliminate the need for a well-constructed investment strategy. Ongoing investment advice in Adelaide is critical to managing risk and pursuing wealth creation throughout retirement.
Mistake 5: Not Managing Sequence-of-Returns Risk
Sequence-of-returns risk refers to the impact of poor investment returns early in retirement, when withdrawals are beginning. This risk is often overlooked but can materially affect outcomes.
Poor management of sequence risk can:
permanently reduce retirement income
force asset sales at depressed prices
increase anxiety during market downturns
Managing this risk requires coordination between investment strategy, withdrawal planning, and cash-flow management. A personalised plan developed by a financial planner can help mitigate sequence risk and support a secure future, with a focus on developing strategies tailored to your individual circumstances.
Mistake 6: Overlooking Tax Components When Starting a Pension
Superannuation balances consist of:
taxable components
tax-free components
When an account-based pension starts:
withdrawals must be paid proportionally from these components
the component mix is effectively locked in
Failing to understand this can lead to:
unnecessary tax
reduced flexibility later
missed structuring opportunities
This is a technical area where professional superannuation advice in Adelaide is particularly important to optimise tax savings and align with your retirement goals.
Mistake 7: Focusing Only on Tax, Not Sustainability
Account-based pensions are often promoted for their tax advantages — and rightly so. However, focusing solely on tax can lead to:
overly aggressive withdrawal strategies
inappropriate investment risk
short-term optimisation at the expense of long-term security
Tax efficiency should support retirement outcomes, not drive decisions in isolation. A comprehensive financial plan balances tax, income needs, and investment strategy to achieve long-term success.
Mistake 8: Poor Coordination Between Super and Non-Super Assets
Many retirees hold assets both inside and outside superannuation.
Common coordination issues include:
drawing income from the wrong assets
triggering unnecessary tax
duplicating investment risk
misaligning asset allocation
A well-structured retirement plan considers all assets together, not in silos. Business owners should also coordinate their business assets with their personal retirement planning to maximise overall wealth and ensure strategic alignment. Integrated investment advice in Adelaide and superannuation advice in Adelaide help ensure your financial decisions are coordinated to support your lifestyle and financial future.
Mistake 9: Ignoring Centrelink and Age Pension Implications
Even where no Age Pension is currently payable, future eligibility can still matter.
Mistakes include:
starting pensions without considering Centrelink rules
misunderstanding income vs asset tests
failing to plan for changes over time
Tax outcomes and Centrelink outcomes are not the same. Both must be considered to optimise retirement income and government benefits.
Mistake 10: Failing to Review Beneficiaries and Estate Planning
An account-based pension is not just about income — it also has estate planning implications.
Common oversights include:
outdated beneficiary nominations
misunderstanding reversionary pensions
failing to consider tax on death benefits
Retirement income planning and estate planning should work together to provide peace of mind and control over your legacy.
Mistake 11: Locking in Decisions Too Early
Some account-based pension decisions are difficult or impossible to unwind. These include:
commencing large pensions without staging
purchasing inflexible income products prematurely
locking in conservative strategies too early
Flexibility is valuable — particularly early in retirement. A financial planner can help you create a strategy that maintains control and allows for adjustments as your circumstances change, so you can look forward to retirement with confidence.
South Australian Considerations
Retirement planning for South Australians comes with its own set of unique considerations. Local economic factors, lifestyle preferences, and state-specific regulations can all impact your financial journey. As a specialist in the financial planning industry, Harry Hagias, Director and Senior Financial Planner at Money Path, understands these regional nuances and provides tailored advice to help clients manage debt, maximise tax savings, and pursue wealth creation.
Harry’s approach to financial planning focuses on helping clients achieve financial independence and long-term goals. By offering expert guidance on investment options, superannuation funds, and retirement planning strategies, he empowers South Australians to make informed decisions about their financial future. With a strong emphasis on managing risk and optimising tax outcomes, Harry’s expertise ensures that your retirement plan is both robust and adaptable, supporting your wealth and lifestyle aspirations for years to come.
Achieving Peace of Mind
For many South Australians, achieving peace of mind in retirement is just as important as reaching financial goals. As an authorised representative, Harry Hagias provides expert advice and guidance to help clients create a personalised plan that addresses their individual needs and concerns. By taking the time to understand your unique situation, Harry helps you feel more in control of your financial journey and more confident in your ability to achieve your retirement goals.
Through tailored financial services, Harry assists clients in managing their finances, investments, and superannuation fund, ensuring that every aspect of your retirement plan is designed to provide security and peace of mind. By proactively addressing uncertainty and potential stressors, Harry enables you to discover a more peaceful and secure financial future. With his support, you can focus on enjoying retirement, knowing that your financial affairs are in expert hands.
Why These Mistakes Are So Common
Most of these mistakes occur because:
retirement decisions are complex
information is fragmented
advice is often generic
decisions are made under emotional pressure
This is why professional financial advice often delivers the most value before problems arise, not after. Advisors enjoy working with clients to help them avoid these mistakes and achieve a secure retirement.
How to Avoid These Mistakes
Avoiding account-based pension mistakes typically involves:
careful timing of pension commencement
coordinated investment and withdrawal strategies
regular reviews and adjustments
clear understanding of tax and Centrelink rules
planning across super and non-super assets
This is the essence of effective retirement planning advice in Adelaide, ensuring you achieve your financial goals with confidence.
How Money Path Can Help
Money Path provides professional retirement planning advice in Adelaide, including tailored guidance on account-based pensions.
We can help with:
determining the right time to start a pension
structuring withdrawals sustainably
aligning investment strategy with retirement income
managing tax and superannuation considerations
coordinating pensions with broader investment strategies
Our approach is disciplined, evidence-based, and focused on long-term outcomes — not product sales. We work with Adelaide retirees and pre-retirees who want clarity, confidence, and control in retirement.
Frequently Asked Questions
Are account-based pensions risky?
They involve investment risk, but when structured properly, they can be very effective and flexible.
Can mistakes be fixed once a pension has started?
Some can be adjusted, but others are difficult to reverse. Early advice is critical.
Should my investment strategy change after retirement?
Usually yes — but not necessarily to an overly conservative approach.
How often should an account-based pension be reviewed?
Regular reviews are important, particularly as markets and circumstances change.
Is advice still useful once I’m already retired?
Yes. Ongoing advice helps manage sustainability, risk, and complexity over time.
Final Thoughts
Account-based pensions are powerful retirement tools — but only when used correctly. Most mistakes are not dramatic or obvious. They are gradual, compounding, and often avoidable with the right guidance.
If you want to avoid common account-based pension pitfalls and ensure your retirement income strategy is structured properly, professional retirement planning advice in Adelaide, supported by investment and superannuation advice, can make a meaningful difference.
