As you spend a considerable part of your working life trying to save money for your retirement, it’s only right that you also prepare for what you’re going to do with the money you save when you retire.
The retirement and superannuation system in Australia has two major phases:
- The accumulation phase when you work and build your super; and
- The drawdown phase when you spend what you’ve saved up.
So many Australians work incredibly hard throughout their life to grow their super and nest egg. But so many people forget to plan ahead for what happens when they can actually access that nest egg.
Whether you’re nearing retirement or you’ve just started working and building your nest egg, this post is for you as we answer the very important question: What can you do with your super when you retire?
What Can You Do with Your Super?
When you retire, you have many super access options. You can choose to:
- Leave the money in your super account (in the Accumulation Phase) until you need it
- Take the money out as a lump sum
- Move your super into an Account-Based Pension
- Move your super into an Annuity
- A combination of the above (ie. take out a portion as a lump sum and turn the rest into an account-based pension)
Option 1: Leave the Money in the Super Account (in the Accumulation Phase) Until You Need It
One of the most common things people do with their super is to let the money stay in the super fund until they need it.
The money can sit there for as long as you like until you need it, and this way, you can leave it invested and even earn interest on it until you’re ready to withdraw it.
Some reasons you might choose to leave your super in the accumulation phase include:
- If you don’t need to access the money yet
- If you have more than $1.7 million in super (as having this amount limits how much of your super you can transfer into an income stream)
- If you are planning to keep working
- If you hold personal insurance within your super that you want to remain in place
Option 2: Take the Money Out as a Lump Sum
You can take your super out as a lump sum, allowing you to use it how you wish such as investing it, paying off debts, or taking an overseas holiday.
However, it’s important to consider the financial consequences of taking your super out as a lump sum such as potential withdrawal tax costs and how this decision may affect your eligibility for the age pension and Centrelink entitlements at a later stage.
Talk to one of our financial planners for more information about your personal superannuation circumstances.
Option 3: Move Your Super into an Account-Based Pension
You can move your super into an account-based pension that pays you a regular income.
An account-based pension offers regular, flexible and tax-effective income from your superannuation fund. This is a great option for people who enjoy consistency as this option provides you with a similar income situation to receiving your paycheck as you would from your job.
Typically, you get to choose:
- How much you want to transfer to the ‘pension phase’ (subject to the transfer balance cap)
- The size and frequency of your payments
- How you want your super invested (through your fund)
Your account-based pension lasts as long as your super money does, but is not a guaranteed income for life.
Option 4: Move Your Super into an Annuity
If you are looking for financial security that will last a lifetime, consider an annuity. You can move your super into an annuity that pays you a regular income for the rest of your life.
As you only get the regular income from this plan and you can’t get access to the rest of your super, this option isn’t ideal for everyone.
However, if you’re looking at retiring soon and need to ensure that you’re covered for your living costs, then an annuity can be a good solution.
Cambio Group’s Superannuation Advice and Retirement Planning Experts Can Help You.
Depending on your needs and situation, you may find that there’s a need to invest your super, take the money out as a lump sum, or even let the money stay in the super fund until you need it.
Whatever the case may be for you, the best thing to do when it comes to making use of your super is to learn about the different options there are and choose the best one for you.
Cambio Group offers retirement financial planning and personalised superannuation advice for retirees looking for financial security.
Contact our experts today to set up a complimentary consultation so you can look forward to your golden years!
Disclaimer: The information (including taxation) in this website does not consider your personal circumstances and is of a general nature only – unless otherwise stated. You should not act on the information provided without first obtaining professional advice specific to your circumstances.
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