Superannuation is designed to be an income source in retirement. It is there to help fund your life when you stop working.
You decide what happens to your super when your reach retirement. Your decisions will be unique to your personal situation.
Your super on day one of retirement
As soon as you stop working, your (former) employer will stop contributing to your super account. Any other contributions arranged through your pay will also end
What happens next is up to you. You get to make decisions about your money.
You can use your super in several ways, including as a regular income with ongoing payments or withdrawing a lump sum to pay out debt or make a purchase. Or you could choose a combination of options.
When can you get your super?
Accessing super is not automatic. Generally, you need to reach a certain age and have stopped working. There are some other circumstances where you might be able to access your super.
In most cases, you can access your super when:
- You have reached ‘preservation age‘ and are permanently retiring from the workforce. Permanently retired means you do not intend to work in paid employment for more than 10 hours a week
or
- You have reached 65 years of age. At that age, you have unrestricted access to your super, even if you have not retired
Other situations in which you may be able to access your super before you retire and reach preservation age include:
- permanent incapacity
- severe financial hardship
- compassionate grounds
- terminal illness
- temporary residents permanently leaving Australia
You must meet set criteria to be eligible to access your super through these options.
Decide what happens to your super
You have several options of how you use your super. You can:
- leave your super as it is, it will continue to be invested.
- set up a stream of regular payments flowing from your super account by opening an account-based pension or purchasing an annuity.
- withdraw a lump sum that might be used to pay down a debt, such as a home loan, or used to make a purchase, like a holiday.
- withdraw all your super.
- choose a combination of an income stream and a lump sum.
Once you have taken money out of your retirement savings, you may not be able to put it back in, so choose carefully. It’s important to consider all your options when making these big financial decisions. Consider seeking financial advice.
When you’re ready to make a decision, contact your super fund.
Barry calls his super fund
Barry is retiring in three months’ time and looking forward to it. He’s excited for what he will be able to do when he has more time and wants to be active in his community. Now he is almost at retirement, he needs to know more about what happens next to his super. He calls his super fund to understand his options for his super after he stops working, and to make sure he understands tax and insurance implications. They help him map out a plan for retirement income and help him fill out the forms to open an account-based pension. This means regular income payments from Barry’s account-based pension account start as soon as he stops working.
Important!
Check with your super fund if your life insurance cover changes or ends when you stop working or reach a certain age. Most funds automatically provide you with life insurance, so you may need to consider your insurance options and costs as you age.
If you have a defined benefit super plan, you will have different options. For example, some defined benefit members may be entitled to a lifetime pension and/or a lump sum benefit. A lump sum can be withdrawn as cash or rolled over to a defined contribution super account. Talk to your super fund or employer for the details.
If you have a self-managed super fund (SMSF) you should understand your role and responsibilities as an SMSF trustee. If you are unsure about how you can access your super, speak to your financial adviser, SMSF administrator or accountant.
How super is taxed
Most people will not pay tax when they withdraw their super because access to super generally starts at age 60 and payments from super to people aged 60 or over are generally tax free.
Some payments from super are taxable, particularly if you are under 60 years.
The amount of tax you pay depends on a range of factors, such as:
- your age
- the reason for withdrawal
- the taxable components, and
- whether you withdraw your super as an income stream or lump sum.
You can generally choose one or a combination of withdrawal options. Super withdrawals can affect your entitlements to income support payments and allowances.
Consider seeking financial advice before you decide to withdraw your super.
Key actions you can take
Find out more about your options for retirement income when you stop working.
Check when you are eligible to access your super.
Talk to us to discuss your options for when you retire.
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Wealthness Pty Ltd ABN 13 231 248 112 [t/a Better Financial Planning Australia] is a Corporate Authorised Representative of Infocus Securities Australia Pty Ltd ABN 47 097 797 049 AFSL No. 236523. It is important to be aware that Better Financial Planning Australia is not authorised by Infocus to provide advice relating to credit services or property advice. Infocus is not responsible for any advice outside of the scope of this authorisation and should you wish to act on any of this general information, please first seek professional financial advice.
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This information is of a general nature only and neither represents nor is intended to be specific advice on any particular matter. Infocus Securities Australia Pty Ltd strongly suggests that no person should act specifically on the basis of the information contained herein but should seek appropriate professional advice based upon their own personal circumstances. Although we consider the sources for this material reliable, no warranty is given and no liability is accepted for any statement or opinion or for any error or omission.
Wealthness Pty Ltd t/as Better Financial Planning Australia does not give any warranty as to the accuracy, reliability or completeness of information which is contained in this website. Except insofar as any liability under statute cannot be excluded, Wealthness Pty Ltd t/as Better Financial Planning Australia and its employees do not accept any liability for any error or omission on this website or for any resulting loss or damage suffered by the recipient or any other person.
Wealthness Pty Ltd (ACN 613 313 250) [t/a Better Financial Planning Australia] Corporate Authorised Representative of Infocus Securities Australia Pty Ltd ABN 47 097 797 049 AFSL Licence No. 236523.
Source: ASIC MoneySmart
