For most of us, declaring we’ve permanently retired at age 60, or reaching age 65, is when we get the most choices with our super. The main options:
a) Do nothing
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Leave money in super for as long as you want, even if you’re allowed to withdraw it.
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This can be useful if you’d like to contribute more or consolidate super accounts before starting an income stream.
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Biggest negative: taxation of investment earnings at a maximum rate of 15%. This is probably more than what you’ll be charged in regular retirement income stream from age 60 (0%).
b) Start an income stream
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The most popular way to turn your super into a regular income stream to support your retirement years.
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It means transferring your super to a retirement phase account within your super fund, another super fund or life insurance company.
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Super income streams are also known as pensions and annuities. They can be account-based pensions with no set time period or annuities that are fixed for a specific period of time.
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Generally, your super fund will be required to pay you at least a ‘minimum’ amount based upon your age.
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There are limits on how much super money you can put into them. If you’ve got too much, you can leave it in accumulation phase or cash it out.
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From age 60 all investment earnings, pension payments and lump sums (excluding certain death benefits) within and from a super pension, are completely tax-free (some exceptions to the rule exist).
c) Cash out
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Provided you can access your super, you can withdraw some or all of it as cash. This is called a lump sum withdrawal or commutation, and is usually tax free once you’re age 60 or over.
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Remember: once your money is out of super you may not be able to get it back in if you change your mind. Earnings on investments outside super are generally taxed at your personal rate which could be more than the maximum rate of 15% applied to earnings in super, or 0% once you start an income stream (some exceptions to the rule exist).
d) Cash out and start an income stream - assuming your fund permits this.
Note: Defined benefit funds are complex and the above options may not be available or appropriate for you. Contact the defined benefit fund for guidance.