Home' Retire Successfully : October 2018 Contents Once you’ve built up a retirement nest egg,
it can seem like a lot of money. You might
be tempted to take at least some of your
superannuation as a lump sum and treat
yourself to something. But remember, with
life expectancies on the increase, your
money is likely to have to last a long time
maybe even over 20 years. To ensure
you enjoy your retirement, you’ll want your
money to last at least as long as you do.
Retirement income can come from a
variety of sources – a government pension,
investment returns such as interest,
dividends and rent, and retirement income
stream investments especially designed
for retirees. You’ll need to consider how you
want to access your superannuation and
consider the advantages of leaving it in the
superannuation system and drawing
a regular income from it.
This chapter explores several strategies for
making the most of your retirement income.
Some strategies can provide tax efficiencies
or favourable Centrelink treatment. Some
give flexibility in how you can access your
money, with no guarantee of how long it will
last. Others provide a secure income for
a set time.
Three things you could do
with your super
Option 1 Take the lump sum
It might sound good having such a large
amount of money in your hands. You
could go on a holiday, buy a new car or
pay off any mortgage you might have left.
But before you follow this temptation,
remember you’ll need money for many years
to come. And by taking money as a lump
sum, you might miss out on tax advantages
of leaving it in the superannuation system.
If you do decide to take all your
superannuation as a lump sum, it would
be wise to re-invest it in a well-planned
manner, according to the four principles of
wise investing (see Chapter 2, and the case
study on page 45).
Option 2 Leave it in superannuation,
and maybe draw regular pension
If you decide to keep your money within
the superannuation system, the investment
earnings on this money will continue to be
concessionally taxed at just 15%.
If you choose to start a pension with
your superannuation savings, you will
receive a regular income which receives
favourable tax treatment. In addition, the
earnings and capital gains on the assets
supporting the pension are exempt from
tax. Generally there are limits on the amount
of superannuation you can use to start a
Option 3 Take part as a lump sum and
part as a pension
This could offer you the best of both worlds
some money for now and some money for
later. When planning your retirement income
strategy you need to think about whether
you have enough investments that give you
easy access to funds. If not, taking a partial
lump sum could provide you with a future
cash reserve. Superannuation rules restrict
the amount that can be transferred into the
concessionally taxed retirement phase.
Speak to your adviser for further information
on how the rules may apply for your
Be aware though that even if you use all
of your superannuation savings to start a
pension, you may be allowed to draw extra
amounts of money as needed from the
pension. Many products allow you to draw
extra amounts of money as needed so you
could get flexible access to your funds.
Retirement income and tax
If you are aged 60 or over superannuation
lump sum or income stream payments
are tax free (if paid from a taxed source,
which is the most common source). If you
are less than 60, the tax you pay depends
on whether you take the money as a lump
sum or income stream and on what basis
contributions were made. Between your
preservation age and 59, tax concessions
Looking more broadly, other tax
concessions may be available to reduce
tax payable on non-superannuation
Current legislation makes it possible for
a couple over age pension age to receive
up to $57,948 (combined) in 2017/18
in retirement income before paying any
tax, however Medicare may be payable.
For a single person the level is $32,279.
The level of tax free income you may receive
in retirement depends on your specific
circumstances and investments.
Retirement income strategies
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