Much of the energy in running a self-managed super fund goes into growing the balance: choosing investments, making contributions and watching the total climb over the years. Yet accumulation is only the first half of the task. Turning a balance into a reliable income that lasts, without running out or leaving money stranded, is a different discipline with its own rules, risks and rhythms. Understanding why the second half is genuinely harder helps trustees plan for it deliberately, rather than assuming the hard work ends the day they retire.

Two halves, two skill sets

The accumulation phase rewards patience and consistent investment. Markets rise over time, contributions compound, and a long horizon smooths out Volatility so that a bad year is just a bump on a long road. The decumulation phase reverses several of those advantages at once: the horizon shortens, withdrawals are being made, and there is less time to recover from a poor run of returns.

Trustees who are comfortable picking investments can find the switch to drawing an income unfamiliar and even unsettling. The questions change from how to grow the balance to how much can safely be spent each year, in what order Assets should be drawn down, and how to keep enough cash on hand to pay pensions on time without selling growth assets at the wrong moment.

Longevity and sequencing risk

Two risks dominate the income phase. Longevity risk is the chance of living longer than the money is planned to last; with many retirees now spending two or three decades in retirement, a plan built on optimistic life expectancy can fall short late in life when Options are limited. Sequencing risk is the danger of poor returns early in retirement, when withdrawals lock in losses that later gains cannot fully repair.

A clearly labelled hypothetical makes the point. Imagine two funds that earn the same average return over twenty years, but one suffers its worst years early while the retiree is drawing an income. That fund can finish with far less than the other, purely because of the order in which the returns arrived. The long-run average was identical; the lived outcome was not. That is sequencing risk in a single sentence.

Converting balance into income

Moving to the retirement phase means starting a pension, and that engages the transfer balance cap, the limit on how much can be moved into a tax-free retirement-phase income stream. The general cap was indexed to $2 million from 1 July 2025, with individual caps sitting between $1.6 million and $2 million depending on when a person started their first retirement-phase pension and how much of their personal cap they have already used.

Amounts above a member's cap must stay in the accumulation phase, where fund Earnings are taxed at up to 15 per cent rather than being exempt. For funds with large balances, this shapes how much income can be drawn tax-effectively, how the remainder is invested, and how the two pools are managed alongside each other over time.

The rules on drawing income

Account-based pensions carry minimum annual drawdown rates that rise with age: 4 per cent under 65, 5 per cent from 65 to 74, 6 per cent from 75 to 79, 7 per cent from 80 to 84, 9 per cent from 85 to 89, 11 per cent from 90 to 94 and 14 per cent at 95 and over. The temporary halving of these rates during the Pandemic ended on 30 June 2023, so the standard rates now apply in full.

Meeting the minimum each year is a strict compliance requirement, not a target, and a fund needs the Cash Flow to pay it or risk losing its pension tax exemption. That is precisely where Illiquid assets, such as a single direct property, can strain a pension-paying fund that has not planned its liquidity.

The structural challenge

Decumulation is as much about structure as about returns. Trustees must balance growth assets that keep pace with Inflation against stable assets that reliably fund near-term payments, all while managing tax, contribution and transfer caps, and the fund's own Liquidity needs as members age or exit.

None of this points to a single right answer, and none of it is personal advice. But it explains why so many retirees find the income phase demands fresh planning and, often, professional input, rather than simply switching off the accumulation strategy that served them well on the way up.

Where advice and structure meet

The income phase also raises questions that reach beyond investing. Reversionary pensions, which automatically continue to a surviving spouse, binding death benefit nominations and the interaction between the transfer balance cap and estate planning all shape how a fund passes Wealth on. These are decisions with legal and tax consequences that are hard to unwind once made.

A regular review cadence helps. Circumstances change: markets move, health changes, a member dies or a large expense arises, and the plan that suited a 65-year-old may not suit an 80-year-old. Building in an annual check of drawdowns, liquidity, caps and beneficiary arrangements keeps the strategy current. Because so much of this is regulated financial, tax and legal territory, it is an area where qualified advice usually earns its keep, and this article is general information only.

There is also a behavioural dimension that is easy to underestimate. After decades of being encouraged to save and grow a balance, many retirees find it psychologically difficult to switch to spending it, and can end up living far below their means out of caution. A clear, well-structured income plan can give trustees the confidence to actually use the money they worked to accumulate, which is, after all, the purpose of the fund in the first place.

Practical takeaway

Reaching a target balance is a milestone, not the finish line. Funding a retirement income introduces longevity risk, sequencing risk, the transfer balance cap and minimum drawdown obligations, all of which require a different plan from the one that built the balance. Trustees are well served by designing the income phase deliberately, keeping enough liquidity to pay pensions, and seeking qualified advice on caps and structure before they stop contributing.