Retirement in Australia means sunny days at the beach, family barbecues, and the ability to pursue activities and hobbies without the constraints of a 9-5 job. However, upon retirement, many find their dream to be a harsh reality due to shrinking income streams, which in turn makes them have to make difficult decisions, such as, downsizing their homes and canceling holidays with the grandchildren. The most common reason for this reality is a neglected but easily avoided step in the superannuation management process: failing to regularly rebalance your super fund. In my 15 years of experience in financial services working with hundreds of pre-retirees, this mistake has cost them a significant amount of income, and in some instances, the amount is as high as the amount they would have received in total annual income.
Let’s analyze this problem and provide the necessary steps to correct it quickly.
The Australian Taxation Office has recorded superannuation balances for 2025 to be at a historic high with the average superannuation balance at nearly $200, 000. However, a 2024 ASFA report showed that 40% of retirees have reported a 15-20% decline in their real income within 5 years of retirement, and this is a result of the volatility in the market that affects the growth assets. In the absence of active management of your super, it will become a liability. In the accumulation phase, the goal should be to accumulate as many growth assets as possible because they will provide a greater return, but when retirement arrives, growth assets have lost their utility. If your goal is to have a steady income, you will have to adjust your assets because of the market downturn in 2022. At that time, the ASX 200 index experienced a 10% decline and that is the time when your cost of living is at a drawdown rate. Rebalancing is selling of the high performing assets and purchasing the low performing assets. If you have a 50% growth and 50% defensive balance, it will prevent the erosion of your superannuation.
Why Rebalancing Is Your Safety Net in Retirement
You could liken your super portfolio to a garden. If you neglect your garden and do not weed, your garden will be overrun by aggressive plants (like high risk shares) and your more stable plants (bonds or term deposits) will be lost. Balanced portfolios suffer less in downturns. The Australian Retirement System notes unbalanced portfolios in Australia suffer 25% deeper drawdowns during volatility compared to rebalanced portfolios. For retirees in Australia, if you draw a pension (like with a super) you will lose 4,000 to 8,000 dollars in less income annually, based on your balance of 500,000 dollars, with your savings being more than enough to pay for a trip to Europe or pay for some renovation.
I have advised clients like Sarah, a teacher in Sydney, who retired at 65, with 750,000 in super, 70% growth super, and has been investing in strong markets for years. When inflation was 7% in 2023, her unbalanced portfolio lost 12%, therefore her yearly pension was reduced by 9,000 dollars. If she had rebalanced her portfolio to to 60/40, she would have limited her loss to 5%. It not only costs you nothing to do, funds like AustralianSuper or Hostplus allow you to do this. If you’ve not been doing this, you have literally been betting your savings on a continued aggressive upward trend in the market in a time when the average life expectancy for men in Australia is 83 years and 87 for women. This is based on data from Australian Bureau of Statistics.
Risks of Missing Rebalancing in Australia
Australia has a multi-layered complexity system of super; An individual’s Age Pension eligibility involves an asset test that can disqualify a person from part Centrelink payments due to income drops from portfolio volatility. Additionally, due to the current Transfer Balance Cap of $1.9M (to be $2M in July 2026 per Treasury announcements), growth assets that are balanced less than that will result in having to pay tax on an excess growth asset. Super funds are unbalanced — this leads to inefficiently chasing returns — increasing your fees. Super Ratings shows that high-equity options (which are 80/20 balanced funds) are 0.8% higher in fees on average.
Using volatility and ASX historical data, below is a 10yr post-retirement data comparison of a rebalance vs an unbalanced strategy assuming 4% drawdown)
| Strategy | Starting Balance | Annual Drawdown (4%) | Ending Balance (After Volatility) | Avg. Annual Income Loss |
|---|---|---|---|---|
| Rebalanced (60/40) | $500,000 | $20,000 | $620,000 | None |
| Unbalanced (80/20) | $500,000 | $20,000 | $410,000 | $6,000 |
| Market-Timing Attempt | $500,000 | $20,000 | $375,000 | $9,500 |
Rebalancing in this scenario (a $210,000 difference) shows the vast potential of rebalancing and its importance in maintaining sufficient assets to cover the average person’s increasing aged care costs — $300,000 according to the Aged Care Quality Commission.
Rebalancing Your Super
Rebalancing is easy; Simply log in to your super (MyGov has links to most super funds) and see your allocation; Ideal allocation can be described in “buckets”; 70% equities in your 50s, 60% growth in your 40’s and less by retirement. Set auto-rebalancing if able, if not schedule a review annually during tax time. Advice from an FAAA listed adviser can be made for self-managed super funds as around 25% of Australians do. Fees can be minimal — often under $500 per year vs $1,000’s in growth that is lost due to your lack of restructuring.
Government-sponsored tools, like those available on Moneysmart.gov.au, have scenario-building calculators. After the 2024 election, one client, a tradie from Brisbane, adjusted his portfolio post-election rebalancing by 1.2%, increasing his safe withdrawal by $7,200 a year. Don’t wait for a market scare; act now to preserve your retirement happiness.
Fortify Your Retirement Strategy for Australia
Rebalancing might not get the credit it deserves, but it’s the unsung champion that keeps your super active throughout the ups and downs of the Aussie economy—and to include rate increases by the RBA and other world variables, it’s a must. Add on your to-do list ETFs that include the ASX 300 and bonds that have been adjusted for inflation and you’ll be on your way. Keep your goals in mind: track your progress at least once a quarter, be sure to make adjustments for any changes in your life, such a health scares, take two year intervals to review your plan with experts, and most of all your future self, sitting in Noosa with a flat white, will definitely appreciate the effort.
FAQs
Q1: My super fund does not offer auto-rebalancing. What can I do?
Find one that does, such as AMP or Cbus. You can also do it yourself by making contribution and withdrawal changes. Most of the time, it is a simple and fee-free process.
Q2: How often do I need to do this?
In most cases, you should do it once a year, or whenever you notice that 5-10% of your target allocations have drifted. Your goal should be to reduce taxes and the costs of trading.
Q3: Can rebalancing affect the age pension?
In a preventative way, it can, by “stabilizing” your assets. This means that you may be able to obtain your pension. To determine this, you can use the estimation tool that is offered by Centrelink.
