Funding Your Retirement

While we generally think of superannuation (super) as a means funding your retirement, there are many circumstances in which you can access your super. In addition to retirement, other reason for permitting access to super are, an insurance claim, terminal illness or financial hardship.

Irrespective of the circumstances in which superannuation is accessed, there are a number of conditions one must meet, before they can access their super.

In this article, we look at accessing super as a retirement benefit. In upcoming articles, we will look at how super can be accessed as an insurance claim, as a terminal illness benefit and through financial hardship provisions.

Using superannuation as a means of funding your retirement is the most common reason people access their super. After many years of working and contributing to a superannuation fund, money is made available to provide an income in retirement. However, before funds can be accessed, the individual must meet a condition of release – basically they must meet a set of conditions before they can claim their super.

These conditions are;

• Reaching Age 65
• Reaching Preservation Age
• Retiring

Of course, each of these conditions have their own set of criteria, which we look at below.

Accessing your super at age 65 is relatively simple. You simply have to reach your 65^th birthday! Once you reach age 65, you have full access to your super.

There are no cashing restrictions or taxation issues, which gives you (and your financial adviser) a variety of options to help ensure your superannuation benefits fund your retirement with an ongoing income stream.

If you have reached preservation age (find your preservation age below), but you are still working, you may be able to have limited access to your superannuation funds.

There are many reasons you may want to access some of your superannuation money before you fully retire.

You may be reducing the number of hours you are working as you transition into retirement, you may wish to utilise some extra cash to pay down a mortgage or take a holiday or your financial adviser may be implementing strategies to boost your retirement savings.

Irrespective of the reason, you may be able to start a Non-Commutable Allocated Pension (NCAP), or a Transition to Retirement (TTR) Pension, as it is commonly known. This TTR Pension is a special account, which allows you to take a percentage of your superannuation balance, as an income stream. The maximum amount you can draw is 10% of your account balance.

Preservation age can vary from individual to individual. In 2015, the government of the day changed the rules for super. They did not want to surprise anyone with super changes so they created some ‘phase-in’ rules that meant some people can access their super before the age of 60. These rules for preservation age are as follows.

So, when considering preservation age and retirement, an individual must identify their date of birth, and then they can determine their preservation age!

If you wish to claim your super, under a definition of retirement, you will need to meet the following criteria.

• You have reached your preservation age And,
• You have met a work test

The work test is dependent on whether you are under 60 or over 60. (Keep in mind, some of us have a preservation age of 60)

Age Test under 60: An arrangement under which the member was gainfully employed has ended, and the trustee is reasonably satisfied the member intends never to be gainfully employed for at least 10 hours per week.

Age Test from Age 60: An arrangement under which the member was gainfully employed has ended, after turning 60

So, if you have reached your preservation age AND you meet the work test criteria, you should be eligible to access your super. This should in turn give you unrestricted access to your superannuation monies – providing funding for your retirement.

Of course, super can be a complicated area, so if you are unsure of superannuation legislation, we suggest speaking with an authorised financial planner who can assist you with your enquiry.

Even if you meet one of the conditions above, there are still a number of factors to consider when accessing your super money. Some of these include

• Taxation of super benefits
• How will a withdrawal impact longevity of funds in retirement
• Will the withdrawal impact Centrelink payments (now and in the future)
• Are super proceeds going towards a good investment, or could the money be better used elsewhere?

These are just a few considerations. There will be many other factors to consider, based on each individuals circumstances.

It is important to know the impact making a withdrawal from your super account will have on you. If you are unsure or would like some help, feel free to call one of our friendly staff and we can see how we can help you.

Contact Us

At Insight IRS we offer all prospective clients a complimentary initial meeting.
Call 1300 551 267 or Email great.advice@insight-irs.com.au