What should I do with my super?

You have worked hard and saved a lump sum to fund your retirement. Now that you are ready to retire, you will need to decide what you want to do with your super.

Every individual’s circumstance is different. Expert advice which considers every aspect of your financial situation is crucial to making the most of your retirement savings. Telstra Super Financial Planning can help you develop a retirement strategy suited to your needs for no additional cost. To make an appointment you can call Telstra Super on 1300 033 166 or request an appointment online.

Your options

Basically you have three options for your super when you retire:

  • cash it
  • keep it in super
  • convert it into a retirement income stream.

Take the money and run?

It may be tempting to cash your super on retirement to either manage your money yourself or make a big lifestyle purchase – or both. But by keeping your money in super, you can avoid the stress and worry of managing what could be a substantial lump sum and your money will remain in an extremely tax friendly environment.

And if you decide to cash out your super and then later change your mind your options could be more limited. Retirement income streams which qualify for tax concessions, such as Telstra Super RetireAccess® can only be purchased with money from super. If you decide that you would like to receive an income stream and only have non-super monies with which to make the purchase, you will have to consider an annuity – which do not receive such favourable tax treatment. See Retirement income streams for more information.

Nearly 60?

Since 1 July 2007, the magic age for retirees and super is 60. Once you turn 60 your withdrawals and income payments from your super all become tax-free (provided your super is from a taxed source).

Tax on lump sum withdrawals
 Age Tax on taxable component
 60+ Nil 
 55-59 First $160,000 tax-free
Amounts above $160,000 taxed at 15%
(plus Medicare levy) 
 Under age 55 (current preservation age) 20% (plus Medicare levy) 

 

Example of a $500,000 lump sum withdrawal
Lump sum withdrawal age   Tax payable  Net withdrawal
 54  $96,750  $403,250
 59   $47,850  $452,150
 60   Nil  $500,000

Assumes tax-free component of $50,000. Taxable component of $450,000 includes Medicare levy of 1.5%.

 

Super vs a retirement income stream

Depending on your circumstances, you may wish to keep some or all of your super benefit in an accumulation style super fund. However given that investment earnings are tax-free from income streams for persons 60 or over, you need to decide whether the benefits of maintaining an accumulation style arrangement justify the extra tax.

Some issues to consider when making your decision:

  • Withdrawals from accumulation arrangements are not considered income for the purposes of the Centrelink Income test, see Centrelink and retirement for more information.
  • By splitting your money between an accumulation arrangement and a retirement income stream you will have a lower income stream balance and therefore a lower minimum annual income payment requirement, which may be advantageous if you are wanting to draw down your super more slowly.
  • All investment earnings from a retirement income stream are tax-free to persons aged 55 or over (if paid from a taxed source).
  • If you are aged 55 – 60, you may be entitled to a 15% tax-offset on your income stream payments.
Telstra Super offers a retirement income stream, Telstra Super RetireAccess. To discuss how you should best structure your finances in retirement, why not take advantage of Telstra Super Financial Planning. To make an appointment you can call Telstra Super on 1300 033 166 or request an appointment online.

 

Further details on the benefits of retirement income streams and how they work can be found on the Retirement income stream pages.