A new academic analysis of the sustainability of retirement income has found the size of a starting balance was only one critical feature driving savings longevity and the portfolio mix and sequence of returns in the early years of post-work life also played key roles.
The findings are part of a study conducted at the Monash Centre for Financial Studies by Associate Professor Ummul Ruthbah and Dr Trinh Le from the Monash Business School, who used capital market assumptions (CMA) developed by the centre to reach their view the three factors were key indicators of retirement income sustainability.
Ruthbah said: “Retirees with less than $250,000 face a high likelihood of exhausting their superannuation within a decade if they target a comfortable lifestyle. At balances above about $400,000, the chance of sustaining income rises to near certainty, regardless of portfolio design.
“Another important consideration is maintaining some exposure to equities. Our capital market assumptions suggest that bond-only portfolios are unlikely to generate optimal returns relative to the level of risk taken over the long term.”
Le added the analysis considered what were ideal portfolio settings, stating: “Mixed equity-bond portfolios, which are investment strategies combining stocks and bonds, provide the most consistent outcomes for modest balances.
“All-equity strategies deliver higher average ending balances, but carry sharper drawdown risks, while bond-heavy portfolios virtually guarantee capital erosion when withdrawals are set at comfortable levels.”
The report of the study stated Ruthbah and Le arrived at these conclusions by applying the CMAs as at 30 June 2025 and tested 11 portfolios ranging from 100 per cent equities to 100 per cent fixed income in increments of 10 percentage points, with balances ranging from $100,000 to $1 million.
The pair focused on projected 2025 mean and median balances for Australians aged 63 to 67 and benchmarked outcomes against the Association of Superannuation Funds of Australia retirement standards.
“The evidence points to a simple conclusion: retirees benefit from maintaining meaningful exposure to growth assets. Portfolios that lean too heavily on fixed income may feel safe in the short term, but almost guarantee declining balances over time,” they stated in the report.
The research also noted the role market losses could play in the first stages of retirement, pointing out a person who retired in 2022, where market volatility led to very poor or negative equity and fixed-income returns, could have a lower portfolio balance after 10 years because of those events than someone who retired in 2023 with the same superannuation balance and investment strategy.
Drawing these themes together, Ruthbah and Le highlighted that while balance size was important at the beginning of retirement, overly conservative portfolio allocations would erode that figure and retirees should consider a moderate level of spending or lower levels of withdrawals during periods of significant market decline.
Jason Spits
SENIOR JOURNALIST
Jason is a senior journalist with Benchmark Media and writes for the selfmanagedsuper website and magazine and smstrusteenews website. He has covered financial services since 1999 and has written about life insurance, superannuation, investment management and financial advice, in both a freelance and in-house capacity, and also did a brief stint as a media manager for an industry association. He has been the editor of trade titles Money Management and Financial Standard, and was most recently senior journalist with life insurance title Riskinfo.
Articles by Jason