7 Common Mistakes Australians Make in the 5 Years Before Retirement

By Ravi Moolchandani, Principal Financial Adviser / Director, Radiance Wealth

Reading time: ˜8 minutes │ Updated April 2026 │ Melbourne, Australia

In more than two decades of providing financial advice, I have noticed a pattern. The five years before retirement are the most consequential of your financial life. This is the window in which the right moves can dramatically improve your outcome — and in which the wrong ones are the hardest to recover from. There is simply less time to course-correct.

In this article, I am going to walk you through the seven mistakes I see most often — and what to do instead. If you want the full picture, this article draws on our comprehensive Pre-Retiree’s Guide for Australians Aged 50–64, which covers everything from super strategy to lifestyle planning in detail.

Mistake 1: Staying in the Wrong Super Investment Option for Too Long

This is the most costly mistake I see, and the most common. A large proportion of Australians are still sitting in the default investment option their employer selected for them when they joined their fund — often decades ago. For many people, that means a balanced or even conservative option.

Here is the problem. If you are 57 years old and plan to retire at 62, you have a five-year investment horizon in super — but that is not the number that actually matters. What matters is how long you will be drawing down on that money. A couple retiring at 62 might need their super to last 30 years. With that kind of horizon, being overly conservative in your investment strategy is not caution — it is a genuine financial risk.

In my experience, being in the wrong investment option at the wrong stage of life is one of the most significant — and most fixable — factors separating comfortable retirees from anxious ones. The difference between a growth option and a conservative option over a decade can easily run to six figures.

If you have never deliberately chosen your super investment option, now is the time to look at it. Our superannuation and SMSF advice service includes a full review of your investment strategy and whether it still makes sense for where you are.

Mistake 2: Not Maximising Concessional Contributions — Especially Catch-Up Contributions

Most Australians know they can make extra contributions to super. Far fewer know about the carry-forward rule — and those who do often underestimate how powerful it is.

From 1 July 2018, if your total super balance is below $500,000, you can carry forward any unused portion of your concessional (before-tax) contributions cap for up to five years. For 2025–26, the annual concessional cap is $30,000 — which includes your employer’s super guarantee contributions (currently 12%), any salary sacrifice, and personal deductible contributions. But if you have not been using your full cap in recent years, you may be able to contribute significantly more in a single year.

Depending on your circumstances, this could mean contributing $80,000 or more into super in a single financial year — all taxed at just 15% inside the fund, rather than at your marginal income tax rate (which for many of my clients is 37% or 45%). For someone in the top bracket, that is a tax saving of 30 cents on every dollar. It is a genuinely remarkable opportunity — and the majority of people in their late 50s and early 60s are not using it.

If your super balance is under $500,000 and you have had any years of lower income or smaller contributions in the past five years, you should be having this conversation with an adviser. See our superannuation and SMSF advice page for more on contribution strategies.

Mistake 3: Underestimating How Much Retirement Will Actually Cost

When I ask new clients how much they think they will spend in retirement, the answer is usually conservative — and usually wrong. Not because they are being dishonest, but because retirement spending is genuinely difficult to predict from the outside.

The early years of retirement are typically the most expensive. This is the period when people are healthiest, most mobile, and most motivated to enjoy their time. Overseas trips that were deferred during work life suddenly become annual events. Eating out more, interstate visits to see the grandchildren, a renovation that was always on the list — these things add up quickly.

The Association of Superannuation Funds of Australia (ASFA) Retirement Standard estimates that as of the December quarter 2025, a comfortable retirement requires approximately $77,375 per year for a couple and around $54,800 for a single person (assuming homeownership). In my experience working with Melbourne clients, a couple who want to travel internationally at least once a year and maintain their current standard of living should be planning towards the top of the comfortable scale — or slightly above it.

The real danger is not running out of money in year five. It is making spending decisions in year one and two — a new car, a renovation, a big trip — without understanding the long-term implications for your balance. A proper retirement plan models your spending across all three phases of retirement, not just the first one. For a comprehensive breakdown, see our Pre-Retiree’s Guide.

Mistake 4: Ignoring the Gap Between Preservation Age and Age Pension Age

This is one of the most consistently overlooked issues in pre-retirement planning — and one of the most financially significant.

Most Australians born after 1 July 1964 can access their super from age 60. But the Age Pension does not start until age 67. That is a potential seven-year gap during which you need to fund your retirement from your own resources, without any government support.

For a couple retiring at 60 on $75,000 a year in combined spending, that gap represents $525,000 — before investment returns. Many people retire with a super balance that looks comfortable on paper, without ever modelling what it will look like after seven years of drawdown before the pension kicks in.

There are also some important nuances around the assets test and income test for Age Pension eligibility. Holding your wealth in certain ways, or failing to structure drawdowns efficiently, can leave you ineligible for even a part pension when you would otherwise qualify. Getting this right can be worth tens of thousands of dollars over a retirement.

A Transition to Retirement income stream can also be a valuable tool for bridging this gap if you are still working — either by supplementing your income while you reduce hours, or by helping you boost super contributions in the years before you fully retire.

Mistake 5: Paying Too Much for Insurance Inside Super — or Having the Wrong Cover

Insurance inside super is genuinely useful — until it is not. And from around age 55 onwards, the economics change significantly.

Life insurance, total and permanent disability (TPD) cover, and income protection premiums inside super all increase with age. From your mid-50s, these increases can be substantial — quietly eroding your balance every year in a way that is easy to miss if you are not reviewing your statements carefully.

Many of the clients I see in their late 50s are over-insured for their current stage of life. Their mortgage is paid off or nearly so. Their children are independent. Their need for high levels of life cover has diminished — but the premiums are still being deducted, and growing. On the other hand, I also see people who have cancelled their income protection cover entirely, not realising they are still five or seven years from retirement and still genuinely exposed to the risk of being unable to work.

Getting the right level of cover for your exact life stage — not too much, not too little — is exactly the kind of thing a financial adviser helps you work through as part of a broader strategic financial plan. One important note: always check what cover you hold before consolidating super accounts. Merging funds can inadvertently cancel valuable insurance you cannot get back at the same premium.

Mistake 6: Treating the Family Home as a Retirement Plan Without Understanding the Rules

“We’ll just downsize” is something I hear regularly. And for many Melbourne homeowners, the family home represents genuine, substantial wealth. The question is how to access it efficiently — and the answer involves more moving parts than most people realise.

Since 2018, Australians aged 55 and over who sell a home they have owned for at least ten years can contribute up to $300,000 per person ($600,000 per couple) into super as a downsizer contribution, outside the normal contribution caps. This is a powerful strategy — but it must be done in the right order and the right timeframe. The contribution must be made within 90 days of settlement. Miss that window and you miss the opportunity.

There are also Age Pension implications to consider. The family home is exempt from the assets test while you live in it — but once you sell it and the funds move into super or other investments, that exemption disappears. A poorly timed or poorly structured downsizer move can push you over the assets threshold and cost you a part pension you would otherwise qualify for.

And then there is the simple reality of Melbourne’s property market. Stamp duty, agent fees, moving costs, and the price of a smaller property in the suburb you actually want to live in can erode the proceeds significantly. Clients are often surprised by how much is left after all of that.

If downsizing is part of your plan, it deserves a dedicated conversation — not an assumption. Our Pre-Retiree’s Guide covers the downsizer contribution rules and how to model them into your broader retirement plan.

Mistake 7: Waiting Too Long to Get Advice — or Treating It as a One-Off

Of all the mistakes on this list, this is the one I find most important to address — because it is the one that makes all the others harder to fix.

There is a common mindset that financial advice is something you get when you are about to retire — a kind of final check before crossing the line. But the five years before retirement are not the end of the planning process. They are the most critical part of it. The decisions you make between 57 and 62 — around super contributions, investment mix, insurance, property, debt, and spending — have a compounding effect on everything that comes after.

The other version of this mistake is people who get a one-off Statement of Advice and then implement it without any ongoing review. Your financial situation is not static. Tax laws change. Markets move. Life changes — health, family, work. A single snapshot of advice from three years ago is not a plan. It is a starting point.

Ongoing advice is not just about investment returns. It is about tax efficiency each year, contribution timing, insurance reviews, Age Pension eligibility modelling, and the kind of regular recalibration that makes the difference between a plan that roughly works and one that is genuinely optimised for your life.

“This isn’t a set-and-forget exercise. Everything keeps moving — your spending, your super, your family situation, what the government changes. The people who come out best are the ones who stay engaged with their plan.”

— Ravi Moolchandani, Radiance Wealth

The Next Five Years Are the Ones That Matter Most

If you are in your 50s or early 60s and any of these mistakes resonated with you, the good news is that there is still time to course-correct. But the window is not unlimited. At Radiance Wealth, we specialise in helping Melbourne pre-retirees turn uncertainty into a clear, confident plan — one that accounts for all the moving parts, not just the obvious ones.

A good place to start is our Pre-Retiree’s Guide for Australians Aged 50–64. Or if you are ready to have a real conversation about your specific situation, we would love to hear from you.

Book a pre-retirement planning conversation with Ravi or Sunny.

Call (03) 9590 6341 | Visit radiancewealth.com.au/contact-us

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