By Philippa Billings, Chief Advice Officer, Otivo
There are two numbers hiding inside this question, and people constantly mix them up. One is the minimum you're required to withdraw each year once your super is paying you an income. The other is the amount you can safely take without running the well dry too soon. They're not the same, and they can pull in opposite directions. Here's how to tell them apart.
There's no single safe figure, since it depends on your balance, age, returns and how long the money must last. A common rule of thumb is about 4% of your balance a year, though it's a guide, not a guarantee. As at July 2026, account-based pensions carry a legal minimum drawdown starting at 4% for those under 65 and rising with age.
What's the difference between the minimum and a safe withdrawal?
They answer two different questions. The minimum drawdown is what the rules require you to take from an account-based pension each year, set so super is actually used for income rather than held indefinitely. A safe withdrawal is what you can take without exhausting your savings too early. In a weak year the minimum might be more than you'd ideally draw, and in an expensive year a safe rate might be less than you'd like to spend. Knowing which number you're talking about is the start of using both sensibly.
What is the 4% rule and does it apply in Australia?
The 4% rule is a well-known guide suggesting that withdrawing around 4% of your starting balance a year, adjusted over time, gives savings a good chance of lasting a long retirement. It's a useful reference point, but it's a rule of thumb rather than a promise, and it came from a different market and different assumptions. In Australia the picture is shaped by our own minimum drawdown rules and by the Age Pension acting as a backstop, so the 4% figure is best treated as a starting sanity check, not a personal prescription.
What are the minimum drawdown rules?
Once you start an account-based pension, the government sets a minimum you must withdraw each year, based on your age. It starts at 4% of the balance for those under 65 and steps up as you get older, reaching higher percentages in your seventies, eighties and beyond. The rule exists to make sure super is drawn down over retirement rather than held purely as a tax shelter. You can generally take more than the minimum whenever you need to, and the ATO publishes the current rates by age band.
What affects how much you can safely withdraw?
Several factors move the safe number. A larger balance and steadier returns lift it, while a long life expectancy and high spending pull it down. The Age Pension matters too, since it can supplement your income as your own savings decline, easing the pressure on your withdrawal rate. For someone like a 67-year-old with $550,000 who also expects a part Age Pension, the sustainable figure looks different from the same balance with no pension support. The safe rate is personal, which is why a projection beats a rule of thumb.
Why does the sequencing of returns matter?
This is the part that catches people out. A poor run of returns early in retirement, while you're also drawing an income, does more lasting damage than the same poor run later on, because you're selling down assets while they're low and they have less chance to recover. It's known as sequencing risk, and it's why two retirees with the same average return over twenty years can end up in very different places depending on when the bad years fell. Managing that risk is often as important as the headline withdrawal rate.
Frequently asked questions
How much can I take out of my super each year?
From an account-based pension there's no fixed maximum above the age-based minimum, so the real limit is what's sustainable given your balance, returns and how long you need the money to last. Drawing more shortens how long it lasts.
Is the 4% rule reliable?
It's a helpful guide rather than a guarantee. It rests on particular assumptions about returns and lifespan, so it works better as a starting sanity check than as a personal withdrawal rate. Your own figure depends on your circumstances.
Do I have to withdraw a minimum from my super?
Yes, once you've started an account-based pension. The minimum is set by age, beginning at 4% for those under 65 and rising as you age, and the ATO publishes the current rates.
Where to from here
The safe number is personal, and it moves as markets and your life do. Otivo, a licensed Australian financial advice platform holding AFSL and Australian Credit Licence No. 485665, offers a retirement planning module that estimates a sustainable drawdown for your situation, based on your balance, age, spending and Age Pension eligibility. It turns a rule of thumb into a figure that fits you.
Sources
- Australian Taxation Office — account-based pension minimum drawdown rates — ato.gov.au
- ASIC MoneySmart — how much to draw from your super — moneysmart.gov.au
- Services Australia — Age Pension and retirement income — servicesaustralia.gov.au
Disclaimer
The information in this communication is current as at July 2026 and has been prepared by Otivo Pty Ltd ABN 47 602 457 732, AFSL and Australian Credit Licence No. 485665. This content is general information only and has been prepared without taking into account your objectives, financial situation or needs. It is not personal financial or taxation advice and should not be relied on as such. Before acting on any information, you should consider its appropriateness having regard to your personal circumstances. This material must not be reproduced in whole or in part, or posted on any social media platform, without the prior written consent of Otivo Pty Ltd.