I’m thinking about retirement…but how do I access my superannuation?

Many people spend a lot of time and effort building up their superannuation. They salary sacrifice, they invest, they read articles all in the hope of building a strong retirement nest egg.

And then, one day, it’s time to access it. What do you do? For many Australians, who have spent so much time investing and saving, they’ve never thought about how to access it, or how to make it last.

To help you make the transition from superannuation saver to retirement lifestyle, we’ve put together this handy guide to help you make the most of your super savings from day one.

When can I access my superannuation?

The short answer here is: when you turn 65. But there are a few more options than simply that age. This is because you can access your superannuation even if you haven’t actually retired once you turn 65.

But what if you want to retire earlier than your 65^th birthday? Well, the good news is that the government has a nominated ‘preservation age’, which all depends on your date of birth. For example, if you were born between 1 July 1962 and 30 June 1963, you could access your superannuation (as long as you were retired) from the age of 58, and not have to wait until you turn 65.

You can also ‘transition to retirement’ which allows you to access some of your superannuation while still working once you hit preservation age. You do this by transferring some of your superannuation to an account-based pension.  This allows you to set up a regular payment from that portion of your super to offset any wages you might lose by reducing your working hours.

This also has some tax benefits, as once you turn 60, you don’t pay any tax on these payments from your account-based pension. However, it has some risks because an account-based pension forms part of the income and assets tests when the Government assesses eligibility for other payments, like the aged pension. So, as in all financial decisions, it’s best to seek expert advice before making any decisions.

What are my superannuation options when I turn 65?

Someone’s 65^th birthday is quite a milestone as it can turn a regular birthday into a SUPER birthday (see what I did there?). So, let’s say you want to access your superannuation the day you turn 65. How do you do that?

Well, there are quite a few ways you can do this, but there are two that are the most popular.

The first is to do a lump sum withdrawal. This is only taken by around 30% of retirees and they usually do it to solve significant financial expenses, such as paying down debt (like car loans or home loans) or making a significant investment outside of their superannuation. The headline here though is, yes: if you want, you could withdraw your entire superannuation balance in one big fat payment.

If you’re over 60, this would be entirely tax-free. But there are a number of drawbacks to this approach. For example, you alone are now in charge of making sure you have enough money for your entire retirement, meaning you’ll need to budget incredibly carefully. And if you choose to invest your lump sum, then you would likely be subject to paying tax on any earnings.

This takes us to the second option which is very popular. It’s called a ‘Super income stream’. This involves setting up regular payments (they must be paid at least annually) which provide a regular revenue stream for retirees, while not blowing the whole thing at once.

There are a few things to be aware of though. For example, you must withdraw more than a minimum amount (that’s a different way of thinking, isn’t it?). At the time of writing, the superannuation rules say that the minimum amount you must ‘draw down’ ranges from 4% for a retiree between 55 and 64 years old, to 14% for someone aged over 95.

What if I don’t want to retire at 65? Can I still contribute to and invest my Super?

The short answer here again is ‘yes’, but things start to get a bit more complicated. That’s because there’s been a lot of rule changes in recent years, and there’s no guarantee things won’t continue to change as governments struggle with debt and the lure of a $3.3 trillion pile of money (it’s not actually a pile).

If you want to keep working, the good news is that unless you did a lump sum withdrawal of your entire superannuation balance, your superannuation account will still have money in it, meaning your employer can still make superannuation payments as part of your employment.

However, some superannuation funds may ask you to sign a declaration when you access your superannuation balance which says that you intend to never return to work again. This is worth investigating as it may impact your ability to make future contributions.

But if you don’t have to sign a declaration such as this, you can continue working even after having accessed some of your superannuation and top it up both with your employer’s regular contributions of 10.5% as well as any voluntary contributions you want to make on top of this.

But wait, there’s more fine print! Once you hit the age of 75, your superannuation fund is not allowed to accept any contributions other than the 10.5% employer contributions. But you’d like to think you’d be withdrawing more than you’d be contributing by that age.

Like any investment, seeking good financial advice is the name of the game. But don’t wait until retirement to come up with a plan for how to spend your superannuation. It may be closer than you think.