Knowing what you can and can’t do with your super can feel like a bit of a minefield when approaching your retirement years, different policies apply to different age groups, and how you access your super, to a degree, is dependent on your individual circumstances.
We’ve compiled all of the need-to-know information to cover nearly every scenario.
Accessing Your Super
The first thing you need to know is that you can access your super without restrictions once you reach your ‘preservation age’, even if you are still in the workforce.
Your preservation age depends on the year you were born and can be found here.
For those who are aged between 60 and 64, you can access your super as a Transition to Retirement Income Stream (TRIS) if you’ve ceased employment and demonstrate you have no intention to return to full-time work.
If, after entering a TRIS you find you’re missing the working world, you can return to work, but you’ll need to supply proof that at the time of retiring, you had no prior intention to return to work. This is to omit people from accessing their super before they are eligible.
Retirement Income Options
When you can access your super you have the decision on how you would like to receive your hard-earned savings! You can take your super savings as a lump sum, income stream, or a combination of both.
An account-based pension (or allocated pension) provides a regular income in retirement. There is no maximum withdrawal limit, but you’ll need to withdraw a minimum of 5% from your super account each year.
On the other hand, an annuity product sold by life insurance or super funds provides guaranteed payments over a set number of years or for life. The terms of annuities vary by policy, make sure to read the relevant product disclosure statement carefully to understand the associated costs and benefits.
Withdrawing Your Super
You can withdraw your super as a lump sum but consider how you’ll fund your lifestyle after retirement. When accessing your super as a lump sum it can be easy to feel as though your money is somewhat of a ‘bottomless pit’, making it not uncommon for retirees to overspend in the early years of retirement.
If you are considering withdrawing your super as a lump sum, try and do so after you turn 60, once you reach this age, lump sum withdrawals are usually tax-free, compared to lump sum withdrawals, which are taxed at your marginal rate when younger than 60.
A popular choice is for retirees to receive their super on a month-to-month basis, mimicking the pay structure from your time in the working world, making it somewhat easier to manage your money and cover your living expenses.
Take the time to work out your estimated monthly expenses based on the type of lifestyle you’d like to lead.
Maximising your Super benefits
Payments to your super are categorised into concessional or non-concessional contributions.
Concessional contributions, such as your employer super guarantee, are taxed at 15% in your super fund (or 30% if your total income exceeds $250,000). Non-concessional contributions include amounts from inheritances, sales of large assets, or government co-contributions.
You can also make tax-free downsizer contributions and non-concessional contributions of up to $300,000 using the proceeds from the sale of your home.
Making voluntary contributions during your working life is a great way to increase your retirement budget, while it may be tempting to splurge in the sales or treat yourself to a dinner out, by investing early you’ll reap the rewards in the long term from the compounding interest.
Downsizer contributions
Many retirees opt to downsize during retirement to reduce the load of household chores and release equity from their homes. If you are aged 55 or over, you are eligible to add a non-concessional payment of up to $300,0000 to your super fund. This is particularly advantageous for couples, who can add $600,000 tax-free to their super.
These contributions are subject to certain restrictions. For advice on your circumstances, please consult with a registered financial advisor.
Work Test and Contributions
If you’re aged 67-74 and want to claim a tax deduction for your personal super contributions, you must satisfy work test requirements. The work test requires you to have worked at least 40 hours over 30 consecutive days in the financial year.
Age Pension Entitlements
To maximise your monthly income it’s worth researching the eligibility criteria for the Aged Pension. To qualify you must be over the age of 66.5, and meet the requirements of the Federal Government’s income and assets test.
Common Superannuation Questions
Does withdrawing your super affect your Age Pension or other pension?
Yes, taking money out of your super can impact your Age Pension or other government payments. Centrelink assesses your super as part of your assets and income, so withdrawing funds might change how much pension you receive. If you’re unsure, it’s a good idea to chat with a financial advisor who can guide you through your options.
Can I access my super early in very limited circumstances, such as severe financial hardship or a terminal medical condition?
Absolutely, there are some rare situations where you can access your super early. For instance:
- Severe Financial Hardship: If you’re struggling to pay your bills and have been on government income support for at least 26 weeks.
- Terminal Illness: If two doctors (one being a specialist) confirm you have a terminal illness and less than 24 months to live.
You’ll need to provide evidence to your super fund when applying.
How do I access my super if I’m not ready to retire?
Even if retirement is still a way off, there are options to use your super.
- Transition to Retirement (TTR): This lets you withdraw some of your super while still working, as long as you’ve hit your preservation age.
- Early Access for Special Reasons: Such as financial hardship, compassionate grounds, or serious health conditions.Make sure to talk to your fund or a financial planner to weigh up the impact on your retirement savings.
What are the rules around accessing my super as a Transition to Retirement Income Stream (TRIS)?
A Transition to Retirement Income Stream (TRIS) is designed to help you ease into retirement by giving you access to your super while you’re still working. Here’s how it works:
- You need to have reached your preservation age (between 55 and 60, depending on when you were born).
- You can only withdraw between 4% and 10% of your balance each year.
This option can be a great way to top up your income if you’re moving to part-time work. Tax rules differ depending on your age, so it’s worth checking the details with your fund.
Can I make contributions to my super fund if I’m between 60 and 64 and not retired?
Yes, you can! Even if you’re not retired, you can still put money into your super between 60 and 64. You’ll need to meet the work test or qualify for the work test exemption, which means:
- Work Test: You’ve worked at least 40 hours over 30 consecutive days in the financial year.
- Work Test Exemption: If you met the work test last year and have less than $300,000 in super, you’re good to go. You can make employer, salary sacrifice, or personal contributions. These can all give your retirement savings a nice boost!
Please note that while we are able to provide insight into accessing your super early, we are not in a position to provide financial advice. If you need further guidance please reach out to a pension specialist.