If your super balance is less than $250,000, new analysis reveals you will likely exhaust it within a decade if you aim for a comfortable retirement lifestyle. The findings come from the Monash Centre for Financial Studies (MCFS), highlighting the fragility of Australia's retirement system.
Retirement Savings Gap Widens
Australians are living longer, facing higher living costs, and navigating economic uncertainty. The MCFS study shows that a starting balance of over $400,000 is now needed for a comfortable retirement. Associate Professor Ummul Ruthbah and Dr Trinh Le from Monash Business School used Capital Market Assumptions to assess retirement income sustainability, focusing on starting balance, asset mix, and market return sequence.
“Retirees with less than $250,000 face a high likelihood of exhausting their superannuation within a decade if they target a comfortable lifestyle,” Ruthbah said. “At balances above about $400,000, the chance of sustaining income rises to near certainty.”
Gender Disparities Exposed
The analysis reveals structural challenges, particularly gender gaps. Women approaching retirement hold balances 20-30 per cent lower than men, leaving them disproportionately at risk. For median female retirees ($212,000), even balanced portfolios carry material exhaustion chances within a decade, while men with median savings ($283,000) face more secure outcomes.
“This gap has profound implications for retirement adequacy and policy design,” Ruthbah said. “It underlines the need for measures to boost women’s superannuation savings, whether through targeted contribution incentives, reforms to address career breaks and pay disparities, or enhancements to the Age Pension safety net.”
Investment Strategy Matters
The study challenges common beliefs about retirement investment. Mixed equity-bond portfolios provide the most consistent outcomes for modest balances, while all-equity strategies deliver higher average ending balances but carry sharper drawdown risks. Bond-heavy portfolios virtually guarantee capital erosion when withdrawals are set at comfortable levels.
Retirees with small savings cannot sustainably fund higher spending targets. Larger balances can withstand higher withdrawals, but overly conservative allocations virtually guarantee erosion. Adjusting spending to a moderate level rather than comfortable improves sustainability regardless of asset allocation.
“Maintaining some exposure to equities is important,” Ruthbah added. “Bond-only portfolios are unlikely to generate optimal returns relative to risk over the long term.”
Market Timing and Flexibility
The research highlights the impact of market losses early in retirement. Someone retiring in 2022, a year of negative equity and fixed income returns, may end up with significantly lower portfolio balance after 10 years than someone retiring in 2023 with the same balance and strategy. Retirees can reduce or postpone withdrawals during market declines, adopting flexible withdrawal strategies rather than fixed rates.
The authors urge the government to enhance safeguards for low-balance retirees, particularly women, while ensuring portfolios balance growth and downside protection.
Massive Shift to Self-Managed Super Funds
The study follows revelations that Australians have withdrawn over $13 billion from major super funds in the past year, moving to self-managed super funds (SMSFs). Analysis by Elula shows SMSFs captured 17 per cent of switchers in 2025, up from 10 per cent the previous year.
Josh Shipman, Elula CEO, said the movement shifted from retail-led to industry-led, with large default-scale funds facing a growing self-directed member exit problem. “When billions of dollars are leaving professionally managed funds for SMSFs, it raises important questions about engagement, trust and member expectations.”
Reasons for Switching
Australians switch for three main reasons: direct control over investments (individual shares, ETFs, property), belief in better outcomes by managing themselves, and lack of personalised engagement from funds. Shipman noted AI is becoming critical for funds to identify at-risk members and engage them proactively.
SMSF Risks
However, SMSFs carry significant risks. The government's Moneysmart website outlines key dangers: no government safety net against theft or fraud, ultimate legal responsibility for trustees, DIY performance dependence, and complications from life changes like illness or relationship breakdown. Moving to an SMSF may also mean losing automatic life or TPD insurance, and there is no standard avenue for complaints via the Australian Financial Complaints Authority.
Examples of SMSF failures include a Brisbane couple, Sharon and Kevin Doolan, who lost nearly all their $580,000 super after the company managing their money collapsed. “We wanted to retire this year or next year and now because of this we can’t,” Mrs Doolan said. “We are not going to have a comfortable retirement.”
UNSW associate professor Katja Hanewald said SMSFs are legitimate but involve huge legal responsibilities and time commitments. “There can be problems when people are encouraged or advertised to move into self-managed super funds without fully understanding what it involves.”
