The final decade before retirement: 6 things to get right and 2 big mistakes to avoid

This interview was recorded on 23 March 2026.

For many Australians, the 5-10 years before retirement are financially the most important of their lives.

This is the decade where the big questions collide: Should you pay down the mortgage or boost super? How much income will you actually need? When do government benefits kick in? And is the family home helping or hurting your retirement cash flow?

According to Melody Edwards, Senior Financial Adviser and Aged Care Specialist at Evalesco, there’s no one-size-fits-all formula, but there are several decision points that can materially improve outcomes.

Edwards is one of Australia’s most experienced retirement planning experts. I sat down with her to unpack the six big things you need to think about most - plus two costly mistakes to avoid.

1) Should extra cash go to the mortgage or super?

One of the biggest tensions in the final working years is deciding whether spare cash should go towards eliminating the home loan vs accelerating super contributions.

Edwards says the answer comes down to three variables: your mortgage rate, expected super returns, and marginal tax rate. It's the latter one that is often the deciding factor. 

If contributions are made pre-tax via salary sacrifice, the concessional tax environment inside super can make this strategy far more powerful than using after-tax dollars to reduce debt. 

That’s why it’s important to understand how tax rates are applied:

• Concessional super contributions are taxed at a flat 15%, rather than the marginal tax rate
• Most Australians in their peak earning years are paying marginal tax rates of 30%, 37% or 45% before the Medicare levy
• Investment gains inside super are generally taxed at 10–15%, depending on how long the asset has been held

Edwards frames the decision like this:

“If your home loan rate is relatively low compared to what you're earning on your super, then potentially putting money pre-tax into super could be the better option. But if you've exhausted your caps, then reducing debt may be the better option so you can entire retirement without a mortgage.”

2) Project and plan for how much money you need

This remains retirement’s golden question - and one that rarely has a neat formula. 

“Some people, especially at the start of retirement while they're young and healthy, travel more and tick off some of those bucket lists," Edwards says.

That often means the first decade of retirement is the most expensive, with spending inflated by travel, home upgrades, gifting, and lifestyle goals.

But later on - and may you all be blessed with good genetics! - lifestyle spending will likely ease, only to be replaced by rising healthcare costs.

“A common rule of thumb is to target 70–80% of your pre-retirement income.”

But the more important insight is to separate regular income needs from one-off lump sums.

That dream renovation, replacement car, accessibility upgrades, or annual international holiday all need to be layered on top of core living expenses.

3) Lump-sum versus income stream? Choose wisely

A good chunk of boomers, particularly long-time government workers, will be lucky enough to retire on a defined benefit pension - the stuff of unicorns in today’s retirement landscape.

These schemes are relics of a bygone era. Close to retirement, the government typically asks members to elect from one of three choices - but you only get one shot and cannot change your mind later:

1. Take a lump sum, giving you full control over the capital. You became responsible for managing that money and paying yourself an income
2. Elect a lifetime pension, where the government pays an a defined income for the rest of your life, with a surviving partner often able to continue receiving a reduced portion after your death
3. Choose a split strategy, taking part lump sum, and part defined income

“The main benefit, if you choose the income options, is that you don't wear some or any market risk. You're guaranteed an income for your lifetime that is usually indexed for inflation."

The trade-off, of course, is flexibility. There is generally no access to capital for major lump-sum expenses, and if there is no surviving spouse or kids, any residual value often does not pass to the estate.

For most Australians, the more relevant retirement structure will be drawing on their own super capital, which offers significantly greater flexibility around drawdowns, lump sums and estate planning.

But that flexibility also means you need to carefully manage investment risk, drawdown rates and longevity risk over what could be a 25- to 30-year retirement.

4) Consider using the downsizer super contribution

For many Australians, the biggest retirement asset isn’t super - it’s the house.

That’s why downsizing has become one of the most effective late-stage retirement planning strategies.

“Downsizing can be a really good strategy to unlock some of that equity and use that to then supplement or provide for your income needs in retirement.”

The strategy tends to work best when retirees move into a smaller, lower-maintenance property closer to family, healthcare and support networks.

The excess equity can then be moved into super using the downsizer contribution, currently capped at $300,000 per person.

“That can be a very effective way to get up to $600,000 into a tax-free environment, and then that then provides a tax-free income for their living needs."

But there are conditions around using the downsizer contribution, and it’s important to understand them before making the move.

5) Understand, plan for and apply for the Age Pension if eligible

A common misconception is that the Age Pension is only relevant for retirees with modest wealth.

In reality, it can become highly valuable later in retirement as assets are drawn down.

“It might not necessarily be at the start of retirement, but it could be 10, 15 years into retirement that you start accessing some part pension," Edwards says.

For homeowners, the principal residence remains exempt from the assets test, making eligibility easier than many assume. The current thresholds sit at approximately:

• $722,000 for single homeowners
• Just over $1 million for couples

These thresholds exclude the family home but include super pensions, shares, cash, investment properties and vehicles. And yes, the boat counts!

In practical terms, this means the government expects retirees to draw down their own savings and investments before accessing support. A retiree who starts above the threshold may still qualify years later as the nest egg diminishes.

But that doesn’t mean you can simply gift money to the kids to qualify sooner - you need to be mindful of Centrelink’s gifting rules.

6) Make sure to get the Pensioner Concession Card (if eligible)

The Age Pension is only part of the story.

The Pensioner Concession Card can materially reduce everyday living costs, which makes it especially powerful during a cost-of-living squeeze.

“You'll usually get a discount on council rates and utilities. Registration for your car is usually free as a pensioner," Edwards says.

There are also benefits for pharmaceuticals and transport, depending on the state.

For many retirees, these savings effectively act like a tax-free boost to disposable income.

The government sends this out automatically if you're eligible, so make sure you address is up-to-date.

Don’t overlook the Commonwealth Seniors Health Card

One other government benefit Edwards flagged as highly valuable is the Commonwealth Seniors Health Card, which can be particularly useful for self-funded retirees whose assets sit above the Age Pension thresholds.

Unlike the Age Pension, this card is income tested only – there is no assets test. That means retirees aged 67 and over may still qualify even if they hold substantial super balances, investments or property, provided their income remains below $101,105 a year for singles and $161,768 for couples combined.

"This card provides access to cheaper medicines under the PBS, bulk-billed GP visits, and refunds for medical costs above the Medicare Safety Net. Some states also provide additional concession rates for these card holders."

2 MASSIVE mistakes to avoid

We've discussed decisions and strategies - but what are some of the things you can do that cause you to outlive your savings?

I’ve seen my dad’s friends make a common mistake at the finish line: quitting a well-paying job only to realise retirement is more expensive - and boring - than expected.

Unexpected repair bills, rising living costs, supporting adult kids, a grey divorce, living alone etc. - it can all cause financial stress in retirement or make the golden years feel a bit unfulfilling.

As Edwards warns, once you quit your job, there may be no easy way back, because let's be blunt, ageism is real.

“It’s extremely hard to get back to that level of income.”

That’s why, if your employer offers the flexibility, Edwards suggests reducing hours or moving part-time before walking away completely.

The second mistake is going too conservative with your investments too soon. Cashing out super into term deposits may feel safe, but, as she points out:

“You'll start needing to draw into the capital… every year you're drawing more and more, you'll run out quite fast.”

That’s why it may be a good idea to discuss with your adviser how to strike the right balance between growth and defensive assets to ensure you have enough money to enjoy the short term, while also giving your nest egg the best chance of lasting as long as you need it to.

consider seeking advice

This is a starting list of financial considerations to think about so that you (and your family) can at least begin strategising for retirement.

But as Edwards pointed out, there are many moving parts when it comes to retirement - super, the family home, the pension, various eligibility thresholds, tax and investing are all complex in their own right, and even more so when they interact with each other in retirement - and then important items like wills and binding financial arrangements can come into the picture.

Bringing these together in a way that's sensible, tax efficient and doesn’t inadvertently create a disadvantage somewhere else is exactly why it can be so important to seek advice through the process, given the level of complexity.

Watch the full interview with Edwards below.