Now you've retired

Whether you have recently retired, or have been enjoying retirement for some time, its important you consider all of the investment options available, and which is most suitable for your personal situation. Super is an integral part of ensuring you have sufficient income to meet your lifestyle needs and objectives, in a tax free manner.

When can you withdraw your super?

The restrictions the government places on when you can withdraw your super are known as the ‘preservation rules'. The preservation rules mean your super balance remains inaccessible, other than in exceptional circumstances such as death or total and permanent disability, until you reach your preservation age.

Your date of birth	Preservation age
Before 1 July 1960	55
1 July 1960 - 30 June 1961	56
1 July 1961 - 30 June 1962	57
1 July 1962 - 30 June 1963	58
1 July 1963 - 30 June 1964	59
After 30 June 1964	60

Source: Australian Taxation Office

You're over 55, what are your options?

Once you reach your ‘preservation age' you can access your super. This gives you a number of options, such as: 

• You can retire and use your super to fund your lifestyle
• You can continue working part-time and convert all or part of your super into a pre-retirement pension
• You can keep working full-time and continue accumulating money in super 

When to retire?

There are many investment strategies available to retirees and it is important to be aware of which one suits your situation. Whether you have an existing super fund or not, speaking to a Commonwealth Financial Planner may uncover options you weren't aware of.

The decision on when to retire is likely to depend largely on whether you have sufficient financial resources to last the rest of your life, which could be over 20 years. When thinking about the timing of your retirement, also consider that you won't be eligible for a part or full age pension until you reach 63 (women) or 65 (men).

To work out whether you have enough super to retire yet, you need to know two things:

• How much annual income you want in retirement
• How much super you need to produce that level of income

 

If you already know the annual income you want in retirement (in today's dollars), you can use our superannuation calculator to work out how much super you need to generate that income.

If you don't know how much income you need in retirement, the Association of Superannuation Funds of Australia (ASFA) has undertaken research in this area and has estimated that an individual person needs $35,789 p.a., after-tax, to live a comfortable lifestyle. This assumes you own your own home, and budgets for things such as $21.36 per week for gifts and/or alcohol and tobacco, $129.91 per week for food and $30.82 per week for clothing.

Your financial options in retirement

There are many investment strategies available to retirees and it is important to be aware of which one suits your situation, Whether you have an existing super fund or now, speaking to a Commonwealth Financial Planner may uncover options you weren't aware of.

The government wants to help your super last as long as possible, so there are tax benefits to encourage you to convert your super into a retirement income stream such as an allocated pension.

Some of the rules are quite complex so it's advisable to discuss your options with a Commonwealth Financial Planner before deciding on any particular course of action. Here are a few suggestions to get you started:

Think twice before cashing out your super

Get advice before cashing out your super as you probably can't change your mind later. Once you're aged between 65 and 75 you can't put money back into the superannuation environment unless you satisfy a work test.

Also, once your money leaves the super environment and is transferred to another investment such as a term deposit, any income it generates is taxed at normal marginal tax rates. On the other hand, transferring it into an allocated pension or annuity can give you tax benefits.

Consider an allocated pension or annuity

Generally, it is far more tax-effective to convert your super into an allocated pension or annuity than it is to cash it out. The main reasons are:

• You receive a 15 per cent tax off-set on any taxable income
• Any investment earnings are tax free

Allocated pensions are also quite flexible

• You can make lump sum withdrawals whenever you wish
• You can choose how much income you want to receive (above a certain minimum) and when you want to receive it
• You can elect for your dependants to receive any remaining account balance when you die

 Find out more about these tax effective investment options.

Annuities can provide a guaranteed income for a specified period of time, however there are restrictions on access and withdrawals.

Accessing Centrelink benefits

The government age pension provides a safety net for people who cannot fully provide for themselves financially in retirement. For the great majority of people it is considerably less money than they've been used to living on. Find out more about the government age pension.

Planning your estate

Retirement also involves considering what will happen to your money upon your death or that of your partner. It's not about being morbid – it's about being wise. To help avoid unpleasant consequences, consider whether you have adequate life insurance and ensure your will is up to date and investigate whether an Enduring Power of Attorney is appropriate for you.

Superannuation benefits do not automatically form part of your estate, so consider how you would like them distributed after your death. A Commonwealth Financial Planner can explain these issues in more detail.

To find out more about how a Commonwealth Financial Planner may be able to help you, or to make an obligation-free appointment with a Commonwealth Financial Planner call 1800 241 996 or email us.

Important information

• The information contained on this web page is of a factual nature only and is not intended to constitute financial product advice. It has been prepared by Commonwealth Financial Planning Limited without considering your individual objectives, financial situation or needs. You should consider its appropriateness in light of your circumstances and consider seeking professional advice relevant to your individual needs before making a decision based on this information.
• Commonwealth Bank customers who wish to obtain information about Retirement Planning may do so by contacting a Commonwealth Financial Planner. Commonwealth Financial Planners are representatives of Commonwealth Financial Planning Limited ABN 65 003 900 169, AFSL 231139. Commonwealth Financial Planning Limited is a wholly owned but non-guaranteed subsidiary of Commonwealth Bank of Australia ABN 48 123 123 124