You have built up your superannuation and retired but now what? How can you access your super to pay for your dream lifestyle in retirement?
One of the options available to fund your retirement include using all or part of your retirement savings to buy a regular income stream – a superannuation pension.
Regular income payments are paid until the account balance is exhausted. Furthermore, if you have met a full condition of release, any earnings generated or capital gains in the account are not subject to tax. This will be the case where you have reached age 65, or in the event that you notify the fund that you:
- Have reached your preservation age and permanently retired
- Have ceased an employment arrangement after turning 60
The amount that you can use to commence tax-free retirement phase pensions is limited by the transfer balance cap of $1.6 million (current for 2018/19 and may be subject to indexation). Penalties will apply for excess transfers. Superannuation savings above this amount can either: – remain in the accumulation phase of superannuation where earnings are taxed at 15%, or – cashed out of the superannuation system and earnings taxed at marginal tax rates.
What should you consider on starting a pension
In retirement, your superannuation investment strategy may alter. You may want to consider capital preservation as your main objective to ensure that your account, will support you long down the road. Thus, it is important to re-assess your financial needs and how best to invest your capital.
Retirement planning requires that you take stock of how much income you need to support your living costs and desired lifestyle. This requires a hard look at your superannuation and other income streams (rental property, share portfolios, cash reserves outside of super) and your eligibility to the Aged Pension to support your needs.
Once you commence an account-based pension, you must take a minimum amount each year from the pension based on your age. Thus, careful consideration is required to calculate the amount you need to withdraw and to help preserve your superannuation for as long as possible.
Another important facet of starting a super pension is your estate planning. You may consider nominating a death benefit beneficiary or implement a reversionary beneficiary strategy. Superannuation as part of your estate planning is critical and should not be left to chance.
Are there any other options?
You could withdraw part or all your superannuation as a lump sum.
However remember superannuation was designed to replace or supplement the Aged Pension, thus careful planning is required to ensure that you make the best decisions about your retirement. If you squander all your superannuation on discretionary spending, your dream retirement may not look so dreamy anymore.
Is the Age Pension still available?
Your entitlement to the Aged Pension, as part of your retirement income plan, will depend on your age, your assets and income from all sources.