The retirement sweet spot: When less in super can be more
22 Oct 2025
The superannuation ‘sweet’ spot refers to the point where your super and other assets’ total balance sits just under the asset test limit which allows you to receive the full Age Pension. When your super balance grows over this limit, your pension is reduced by $3 a fortnight for every $1,000 above the threshold.
While saving more in super is almost always recommended, understanding the superannuation sweet spot can be a key factor in helping build your retirement strategy.
What is the superannuation sweet spot?
So, what is the super sweet spot that lets you maximise your income from super and the Age Pension? Well, it will ultimately depend on if you’re single or in a couple, and if you’re a homeowner or renting—as this will affect your asset test threshold.
Below are the current asset test thresholds. If your super balance sits just below the lower thresholds, you might be in the super sweet spot. The upper threshold is the point where you’re no longer eligible for the Age Pension at all. Keep in mind that you’ll also need to pass an income test to claim the state pension.
Asset test thresholds – Age Pension 20 September 2025
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| Homeowners | Non-home owners (renters) | |||
|---|---|---|---|---|
| Lower threshold | Upper threshold | Lower threshold | Upper threshold | |
| Singles | $321,500 | $714,500 | $579,500 | $972,500 |
| Couples (combined) | $481,500 | $1,074,000 | $739,500 | $1,332,000 |
Source: Services Australia.
Why it matters: the taper rate trap
The amount Age Pension payments reduce when your assets sit between the lower and upper thresholds is determined by the ‘taper’ rate. It’s this rate that can work against people with large super balances, as every $1,000 of assets above the lower threshold reduces your fortnightly pension by $3—or $78 a year.
This means that retirees need to earn a return of 7.8% annually on their assets to compensate for the lost pension payments. That’s a big return, especially when it would need to be earned every year.
To understand how the taper rate could affect your retirement income, consider this example comparing two single homeowners:
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| Effects Of Super Balance On Aged Pension | ||
|---|---|---|
| Person 1 | Person 2 | |
| Value Of Assets | $300,000 | $600,000 |
| Income From Aged Pension | $30,646.20 | $8,923.20 |
| Super Income (5% Return) | $15,000 | $30,000 |
| Total Income | $45,646.20 | $38,923.20 |
| Difference | $6,723.00 | – |
Source: Canstar – 30/09/2025. Assumes maximum aged pension of $1,178.70 is earned for net assets below assets test free maximum of $321,500 for single home owner per Services Australia. Assumes taper rate of $3 per $1,000 over assets test maximum.
As you can see, having a higher super balance could reduce your total retirement income. However, this doesn’t necessarily mean you’re worse off. If you’re in the taper rate trap, you could choose to draw down your super to make up for the loss in income and watch your pension increase as your assets reduce.
Before making any decisions with your super, talk to your super fund or a financial advisor for professional advice.
How much super do you need to retire?
Australians are regularly reminded of the need to grow retirement savings. Yet it can be hard to know exactly how much we need in our super funds to enjoy a quality retirement.
The Association of Superannuation Funds of Australia (ASFA) says that by the age of 67, a single person needs $595,000 in super for a ‘comfortable’ retirement, while couples need $690,000.
In comparison, Super Consumers Australia (SCA) says a single person could need as little as $130,000 in super or $168,000 for a couple combined. That’s a lot less than ASFA recommends, and that’s because SCA takes into account the availability of the Australian Government’s Age Pension, which can be an additional source of income in retirement.
What matters is that you consider what your ideal retirement looks like, and work out from there how much super you need to achieve that lifestyle. The catch is that tucking more into super during your working life can mean earning less—not more, in retirement income.
Is it still worth growing your superannuation?
The taper rate trap is something to be aware of, especially if your super savings are above the lower threshold of the assets test—but it shouldn’t deter you from growing your super. If you’re getting close to missing out on the Age Pension and want to reduce your total assets, here are a few potential options:
- Invest in your home. If you own the home you live in, its value is typically not included in the asset test. This means you could reduce your total assets by paying into your mortgage, upgrading to a more valuable home or renovating.
- Pay off any debts. This may seem obvious, but if you have any existing debts like credit cards or car loans, paying them off will reduce your total assets while also saving on interest over time.
- Consider a lifetime annuity. When you set up a lifetime annuity, only 60% of the value is typically included in your asset test.
- Gifting. You can typically gift up to $10,000 a year or $30,000 over five years before the amount is considered on your asset test. Also, when you claim the pension, only the last five years are considered, so gifts given prior may not count towards your asset test.
All of these options come with their own risks and benefits, and are worth discussing with a financial advisor before making a final decision.
Find out what your retirement income might look like
It’s possible to get an early idea of what your retirement income will look like—and whether you’re in the super sweet spot or about to overshoot it.
The retirement income planner calculator on the Australian Government’s MoneySmart website shows your likely annual income in retirement, including how much will come from super and how much the Age Pension contributes. It’s worth a look as you can play around with the figures to see how a change in super savings can impact retirement income.
Age pension eligibility may only get harder
The fine print to all this is that our ageing population may mean it’ll become harder to qualify for the Age Pension in the future.
We’ve already seen measures introduced to make it harder to access the Age Pension, including the increase in pension eligibility age from 65 in 2017 to age 67 by mid-2023.
The further you are from retirement age, the greater the likelihood that the rules around accessing the pension will change further. This highlights the need to embrace your super—and any opportunities to add to it during your working life.
Remember, no matter your age, seeking advice from your super fund can act as a source of low cost financial advice to help you find the super sweet spot that’s right for you.
If you’re unsure how the taper rate could impact your pension entitlements, a free financial information service is available through Services Australia – call 132 300 for details.
This article was reviewed by our Finance Editor Jessica Pridmore before it was updated, as part of our fact-checking process.
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