Your retirement questions answered
If you’re wondering what you might do with your super money when you do access it, remember there will be a number of things to weigh up and look into.
How can I take my super?
Taking super as a lump sum
A lump sum could help you pay off your home loan or other outstanding debts, but there may be tax implications to consider and you should think about what you’ll live on if you have no super left.
The government’s Age Pension could be one option, although if you’re pinning your hopes entirely on government support, you should consider the sort of lifestyle it might fund.
June 2017 figures show a 65-year-old retiring today needs an annual income of $43,695 to fund a ‘comfortable’ lifestyle in retirement, assuming they are relatively healthy and own their home outright(i). By comparison, the max Age Pension rate for a single person is around $23,254 annually(ii).
Moving it into an account-based pension (or allocated pension)
If you’re thinking that you’d like to receive a regular income in retirement, an account-based pension (or allocated pension) could be a tax-effective option.
While the most you’ll be able to transfer into these pension accounts is $1.6 million, you won’t be limited to what you can take out. However, each year you’ll need to withdraw a minimum amount.
Purchasing an annuity with your super
An annuity provides a series of regular payments over a set number of years, or for the remainder of your life, depending on whether you opt for a fixed-term or lifetime annuity.
You will however be sacrificing some flexibility, as you can’t easily make lump sum withdrawals and life expectancy is also a major consideration.
What about the Age Pension?
Currently, to be eligible for a full or part Age Pension from the government, you must be 65 or older and satisfy an income test and an assets test, as well as other requirements(iii).
In July, the qualifying age for the Age Pension increased to 65 and 6 months, and it will continue to increase by six months every two years until 1 July 2023 when the qualifying age will be 67.
You can check out your Age Pension eligibility age below(iii).
Date of birth
Age Pension eligibility age
Before 1 July 1952
1 July 1952 - 31 December 1953
65 years and 6 months
1 January 1954 - 30 June 1955
1 July 1955 - 31 December 1956
66 years and 6 months
From 1 January 1957
Meanwhile, it’s important to remember that what you do, and at what time you do it, could have tax implications and may impact your social security entitlements. This is why it’s important you do your research and explore the alternatives with your financial adviser.
Can I return to work if I’ve taken my super?
Generally, you can, but if you previously declared your permanent retirement, you may need to prove your intention was genuine at the time.
According to retirees who did return to full or part-time employment, the most common reasons why they decided to go back to the workforce was financial necessity, followed closely by boredom(iv).
We can help
We can assist you to determine what will work best for you. Give us a call to make a time for a chat about how we can help you to start planning for the lifestyle you want in retirement.
i ASFA retirement standard – June 2017 quarter table 1
ii Department of Human Services - Payment rates for Age Pension table 1
iii Department of Human Services - Age Pension (eligibility and payment rates)
iv ABS – Australian Social Trends – Older people and the labour market paragraph 26
© AMP Life Limited. First published January 2018