Trying to prepare and plan for your retirement requires you to learn a lot about your superannuation.
Superannuation plays an important role in your retirement planning, as it’s an avenue for your income during those golden years.
Unfortunately, so many Australians won’t have enough superannuation to last their whole retirement.
This highlights the importance of better understanding your super now so that when you retire, you won’t have to worry about running out of money.
There are a set of guidelines about super that you may know about already, but there are significant shifts in the way super works by the time you retire.
How to Access Your Super
After turning 65 years old, your super becomes fully accessible to you.
If you plan to access your super earlier, you can access your super when you reach preservation age which depends on your DOB:
|Your date of birth||Age you can access your super (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 1 July 1964||60|
There are a number of different ways you can choose to withdraw your super balance out. It’s important to know there is no right or wrong answer.
You can withdraw your super as:
- A lump-sum: you may be able to use this to pay off debt, or to put into your investment portfolio
- An account-based pension: regular, flexible, tax-effective income stream
- An annuity: a lifetime or fixed-term pension giving you a guaranteed regular income
Know that withdrawals can be made even before you turn 65 too, which you can discuss further with your financial planner if needed. Some transactions may even be tax-free, but there are several factors that will come into play.
Can You Still Make Super Contributions?
Super contributions are one aspect that will greatly shift once you’ve hit retirement. If you still want to contribute to your super, it will depend on 5 things:
Your eligibility to make contributions to superannuation after retirement is based on five factors:
- Your age;
- The type of contribution being made;
- Your account balance;
- When you retired; and
- Whether you will continue to work in any capacity.
Voluntary super contributions will require people aged 67 and up to undergo a work test. Here, a person must engage in paid work for 40 hours over the course of a month. It doesn’t matter whether you’re employed or running a business, but you must meet that requirement when you are over 65 to continue making contributions to their account.
There are exemptions to that annual work test. Those who don’t meet the number of hours required by the Australian Tax Office may make voluntary contributions for a certain period for the last time they complete the test. Your super balance should be less than $300,000 to qualify.
Your superannuation is essential for effective retirement planning
The best way to determine your super will depend on your personal situation which is why it is a wise plan to get personalised superannuation advice.
It’s best to be fully informed as early as now about what you can do to optimise your retirement strategy, so get ahead of the game by retirement planning now.
Seeking retirement planning advice? Blue Financial Ballarat is a leading provider of financial advice helping people just like you achieve their retirement dreams.
General Advice Warning: This article contains information that is general in nature. It does not take into account the objectives, financial situation or needs of any particular person. You need to consider your financial situation and needs before making any decisions based on this information.