From our friends over at Vanguard, this article explores the key considerations for transitioning into retirement.
By Vanguard
Understanding Your Retirement Funding Options
As you approach retirement, you’ve likely considered how to access your superannuation savings. Once you reach the minimum ‘preservation age’ (60 for those born after July 1, 1964), several options become available to you.
Leaving Your Super Alone
There is no legislation requiring you to start withdrawing from your super when you retire. If you don’t need your super for living expenses, you can continue investing it, even contributing additional funds if you earn some work income. You can make voluntary contributions up until age 75, while employer contributions can be made at any age.
If you leave your money in a super accumulation account, investment earnings are taxed at 15%, potentially lower than the tax rate on other investment incomes. However, you can’t withdraw regular pension income streams unless you roll some of your super into an account-based pension. Most super funds do allow lump-sum withdrawals, provided you meet all release conditions.
Starting a Pension Stream
To receive a regular income stream in retirement, you’ll need to roll your super into a pension account. This can be done through your current super fund or another pension product provider. Account-based pensions typically offer monthly, quarterly, half-yearly, or annual payments until the account balance is depleted.
Pension payments and investment earnings are tax-free if you are over 60 and retired. You can also supplement the government Age Pension if eligible and withdraw lump sums anytime. Note that non-dependents receiving money from a pension account upon your death will face tax liabilities.
Combining Both Options
For maximum financial flexibility, consider leaving part of your super in an accumulation account while rolling some into an account-based pension and withdrawing lump sums as needed. This strategy can provide various benefits, but it may also have tax implications for you and your beneficiaries.
Managing a combination of super accumulation, account-based pension, Age Pension entitlements, potential investment earnings outside of super, and irregular lump sums can be complex. Consulting a licensed financial adviser is a wise step in navigating these options.
Important Information and General Advice Warning
Vanguard Super Pty Ltd (ABN 73 643 614 386 / AFS Licence 526270) (the Trustee) is the trustee of Vanguard Super (ABN 27923449966) and the issuer of Vanguard Super products. The Trustee has contracted Vanguard Investments Australia Ltd (ABN 72 072 881 086 / AFS Licence 227263) (VIA) to provide some services to members of Vanguard Super. Any general advice is provided by VIA. The Trustee and VIA are both wholly owned subsidiaries of The Vanguard Group, Inc. (collectively, “Vanguard”). The retirement savings tips provided above are general in nature and don’t take into account your personal financial objectives, situation or needs. You should consider your objectives, financial situation or needs, and the Product Disclosure Statement (PDS) and Target Market Determination (TMD) before making any decision about Vanguard Super. The PDS and TMD can also be accessed free of charge by calling 1300 655 101. Before you make any financial decision regarding Vanguard Super, you may wish to seek professional advice from a suitably qualified adviser. Any past performance information is given for illustrative purposes only and should not be relied upon as, and is not, an indication of future performance. The information above is current as at the time of publication and was prepared in good faith, and we accept no liability for any errors or omissions.
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