Navigating the complexities of superannuation as retirement approaches can be daunting. The retirement phase is, typically, not well understood.
Understanding how to access and utilise your superannuation effectively is crucial for securing your financial future. This blog explores the pathways available for accessing your superannuation, whether through retirement phase accounts, transition options, or strategic withdrawal strategies.
By demystifying these processes, we aim to empower you to make informed decisions that optimise your retirement income and ensure financial stability in your golden years.
Retirement phase
In the retirement phase, you can access your super. This can be done periodically or as lump sums after meeting a condition of release such as turning 60 and ceasing an employment arrangement, reaching preservation age, or turning 65.
Understanding your preservation age
As you approach retirement, understanding your preservation age (typically 60 for those born after July 1, 1964) is crucial. This can be confirmed via the Australian Tax Office website.
Leaving your superannuation untouched is an option
Contrary to common belief, you’re not required to withdraw your super immediately upon retiring. If you don’t require access to your super immediately to cover your living expenses, you have the option to retain it in the accumulation phase. This will allow you to make or receive additional contributions down the track. Any contributions will benefit from a concessional tax rate of 15%, which is often lower than you otherwise may pay.
Commencing an account-based pension
Moving your super into an account-based pension provides regular, tax-free income once you have met a condition of release. These pensions offer flexibility in payment frequency and withdrawal amounts (as long as you take out your annual minimum, which is adjusted based on your age). It can be set up so that your desired income is paid directly to your bank account, just like your salary was before retirement. In this way, there may be very little change to how you manage your household expenses. Further, any earnings or capital gains become tax free in pension phase.
Starting a transition to retirement pension
This may be an option if you are looking to slowly transition into retirement by reducing your work hours. You can start drawing a tax-free income from the account, whilst also still receiving contributions. This option is more limited in the sense that the maximum that can be withdrawn from the account is 10% per financial year and there is still tax payable within the account.
Tax implications and planning considerations
Be mindful of tax implications and eligibility criteria when choosing between these options. Planning with our advisers can minimise tax liabilities and ensure your strategy aligns with regulatory requirements, optimising your retirement benefits.
Navigating your retirement strategy
Navigating these decisions can be complex, given evolving legislation and personal circumstances. Seeking advice from our team of qualified financial advisers is wise. We can offer personalised guidance based on your age, retirement goals, income needs, and tax situation, helping you structure a retirement plan that provides peace of mind and financial security.
Planning ahead and choosing the right strategy can provide peace of mind and financial security as you transition into this new phase of life.
Using the services of our financial advisers is a worthwhile consideration to help you weigh up all options and provide you with a personalised plan for a worry-free retirement. Like to learn more? Contact us today and allow us to help you to make informed decisions with your retirement plans.
