Even though its compulsory to invest money in superannuation, many people do not understand their options once they retire.
This blog provides a summary. However, of course, everyone’s situation is different. Some super funds have different rules and there may be exceptions to some rules, so it’s important you receive personalised advice from an independent financial advisor.
When can you access your super?
The rules that govern when you can access super are contained in the
SIS Act and they are called the
‘conditions of release’. There are three ways you can access your super benefit:
1. You have reached your preservation age, which is age 60 for most people (or sooner if you were born prior to 1 July 1964), you have ceased employment and have no intentions of becoming reemployed in the future;
2. If you have reached your preservation age but are younger than 65 and still working, you are able to commence a Transition-to-Retirement Income Stream (TRIS) pension; or
3. You are 65 years of age, regardless of employment status.
These minimum rules apply to all super funds. Super funds are permitted to impose tougher rules than outlined above, so it’s important to check with your super fund.
You have two options
When you retire you generally have two options:
1. Withdraw your full super balance as a lump sum; or
2. Start an income stream pension.
If you are a member of a defined benefit fund, you may have additional options such as commencing an indexed lifetime pension.
If you opt to take your benefit as a lump sum, some of your benefit (i.e. the “taxable – untaxed element”) may be taxed at a rate of up to 17% and the “taxable – taxed element” will be tax-free.
Given the tax advantages of leaving your money in super (outlined below), most people are much better off to opt to start an income stream pension.
Consequences of starting a pension
You can start a pension by rolling over your accumulation account into a pension account. You can roll over up to $1.7 million into a pension account (this is a lifetime cap – called the
transfer balance cap).
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IMPORTANT: This podcast provides general information about finance, taxes, and credit. This means that the content does not consider your specific objectives, financial situation, or needs. It is crucial for you to assess whether the information is suitable for your circumstances before taking any actions based on it. If you find yourself uncertain about the relevance or your specific needs, it is advisable to seek advice from a licensed and trustworthy professional.
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