When 68-year-old Melbourne retiree Sandra Liu met with her financial planner last year, she believed her retirement income was locked in.
“I had my super, I had my Age Pension,” she said. “I thought that was it.”
But after restructuring how she drew down her super and coordinated it with her Age Pension, Sandra increased her total annual income by nearly $9,500 — without taking on extra work.
In 2026, retirement experts are increasingly pointing to what’s known as a “super-pension combo strategy” — a coordinated approach to drawing super while maximising Age Pension eligibility.
For some retirees, this strategy can add up to $10,000 per year in additional income compared to unplanned withdrawals.
Here’s how it works.
Why Coordination Matters
Australia’s retirement system is built on two main income streams:
- Superannuation savings
- Age Pension support
Many retirees treat them separately. But the interaction between them can dramatically affect total income.
The Age Pension is means-tested. That means:
- Super balances affect the asset test
- Super income streams affect the income test
The way you withdraw super can influence how much pension you receive.
The Core Principle: Controlled Drawdown
The strategy centres on managing how much super you withdraw each year.
If you withdraw too much:
- Your assessable income increases
- Pension payments may reduce
If you withdraw too little:
- You may rely too heavily on the pension
- Your super may grow inefficiently
The goal is balance.
Sandra initially withdrew 8% annually from her super.
After reviewing her position, she adjusted closer to the minimum required withdrawal rate — reducing pension reductions and improving total net income.
Understanding Minimum Withdrawal Rates
If your super is in an account-based pension, minimum annual withdrawal rates apply:
| Age | Minimum Withdrawal Rate |
|---|---|
| Under 65 | 4% |
| 65–74 | 5% |
| 75–79 | 6% |
| 80–84 | 7% |
| 85–89 | 9% |
By withdrawing only the minimum — rather than arbitrary higher amounts — some retirees reduce income-test pressure.
Asset Test Taper Rate Impact
The asset test reduces pension payments gradually once you exceed thresholds.
In practical terms:
- For every additional $1,000 in assessable assets above the limit, pension reduces by a set amount annually.
This taper effect means managing super balances carefully can influence pension entitlements.
Some retirees find that drawing down super slightly faster early in retirement reduces assessable assets and increases pension later.
Real Story: A $9,500 Difference
Sandra’s initial strategy:
- Super withdrawal: ~$36,000 annually
- Age Pension: reduced due to asset and income test
After restructuring:
- Super withdrawal: reduced to minimum required
- Pension recalculated
- Total annual net income increased by ~$9,500
“It felt like free money,” she said. “But it was just better planning.”
The “Sweet Spot” Strategy
Financial planners often refer to finding the “sweet spot”:
- Keep super withdrawals within minimum limits.
- Maintain eligibility for part Age Pension.
- Avoid asset thresholds that sharply reduce payments.
This combination can deliver higher total income than exhausting super aggressively.
What About Investment Allocation?
Maintaining a balanced investment portfolio matters.
If your super earns 5–7% annually:
- It may outpace minimum withdrawal rates.
- Capital preservation improves.
This allows pension support to supplement super rather than replace it.
However, being too conservative may erode purchasing power over time.
Work Bonus as an Add-On
For retirees willing to work part-time:
- Employment income up to $300 per fortnight may not affect pension due to the Work Bonus.
Combined with structured super drawdowns, this can significantly boost total income.
Some retirees using all three components — super, pension, and Work Bonus — approach $10,000 more annually than poorly structured withdrawals.
Downsizer Contribution Considerations
For homeowners who downsize:
- Proceeds can be contributed to super under downsizer rules.
However, once at pension age, these funds count toward assets.
This means careful modelling is essential before moving large sums into super.
Expert Insight: It’s About Timing and Structure
Retirement income specialist Mark Delaney explains:
“The difference between $50,000 and $60,000 annual income can come down to withdrawal timing.”
He emphasises that pension and super planning must be integrated.
“Looking at one without the other is a mistake,” he said.
Who Benefits Most?
The super-pension combo strategy works best for:
- Retirees with moderate super balances
- Those near part-pension thresholds
- Couples with uneven asset distribution
- Individuals comfortable adjusting withdrawal rates annually
It is less relevant for:
- Full-rate pensioners with minimal super
- High-asset retirees ineligible for pension
Risks to Avoid
- Drawing down too aggressively early
- Ignoring income test consequences
- Failing to update asset values
- Overlooking tax implications
Strategic planning requires accurate reporting.
What You Should Do Now
Here’s what you need to know:
- Review your current super withdrawal rate.
- Check how withdrawals affect your pension assessment.
- Model alternative drawdown scenarios.
- Consider professional advice before adjusting income.
- Reassess annually.
Small adjustments can create significant long-term gains.
Q&A: Super Pension Combo Strategy 2026
1. Can I really add $10,000 a year?
In some cases, yes.
2. Is this legal?
Yes, fully compliant with current rules.
3. Does it work for everyone?
No, depends on balance size and eligibility.
4. Should I withdraw only the minimum?
Often beneficial, but depends on circumstances.
5. Does super count under asset test?
Yes, once at pension age.
6. Can I adjust withdrawals yearly?
Yes.
7. Will working reduce my pension?
Not necessarily, thanks to the Work Bonus.
8. Does tax matter?
Super pension phase earnings are generally tax-free within limits.
9. Can couples use this strategy?
Yes, coordination matters even more for couples.
10. Should I seek advice?
Recommended.
11. Is it risky?
Not if structured carefully.
12. Does investment performance matter?
Absolutely.
13. When should I start?
As soon as you enter retirement phase.
In 2026, retirement income is no longer about simply withdrawing super and accepting whatever pension arrives.
For retirees like Sandra, aligning both systems strategically created nearly $10,000 in additional annual income — without extra work or risky investments.
The super-pension combo strategy isn’t a loophole. It’s a reminder that structure, timing, and informed decisions can transform retirement finances almost overnight.
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