I’m retiring, now what?
While retirement may seem like a well-earned reward for years of hard work, it also presents a new challenge: what comes next? Now that you’ve built your nest egg, how do you turn it into a steady income to support the exciting new chapter ahead? To understand your options, it might help to take a step back and understand how your super is designed to work.
Accumulation v retirement phase
Just like your working life, super has two phases – accumulation and retirement. While you’re working, you and your employer(s) add money to your super, known as the accumulation phase. Your money is invested and continues to grow through investment returns (and compound interest).
Once you reach a certain age (and meet other eligibility criteria), you can move it into the retirement phase. This allows you to keep it invested while drawing on your savings for a regular tax-effective income. Learn more about accessing your super.
How does the retirement phase work?
Let’s take a look at the basics and some finer details of the retirement phase.
The basics
- Moving your super into the retirement phase generally means that you’ll move your super into a retirement income account (also known as a pension account).
- This account provides a flexible and regular tax-effective income (or pension payment) from your super savings, while also allowing you to withdraw money as a lump sum if you need it.
- Before you retire from the workforce, you can also consider a Transition to retirement (TTR) strategy. This allows you to wind down your working hours and supplement your income through your super.
A few details
- You choose how your money is invested the same way that you did with your super, choosing from our range of investment options (all from the ease of your online account).
- Your money continues to earn interest and grow, but you won’t be able to add extra money to it during this phase.
- You decide what your regular income payments will be, keeping in mind there are government limits.
- Your income payments get paid directly into your bank account, based on your nominated frequency.
- It’s flexible. If you need to withdraw larger sums of money for a car, holiday, or home renovations, you can. It’s your money, you decide.
Learn more about your options in the retirement phase.
What’s the biggest drawcard?
Moving your super into the retirement phase has a few benefits, including letting a team of experts manage your investments. However, the main drawcard for many retirees are the tax incentives, which can boost effective returns compared to other similar investments you may hold outside of super.
Here’s a snapshot of the tax concessions available in retirement income (pension) accounts:
- Tax-free income payments – there’s no tax on your income payments once you reach age 60
- Tax-free investment earnings – your super will continue to earn you tax-free investment earnings, helping to boost your account balance and provide a retirement income for you for as long as possible.
Setting up a retirement income account will help give you the confidence to enjoy your retirement. Learn more about the benefits of opening a retirement income account with CareSuper.
Beyond the financials
Yes, super and your retirement go hand-in-hand, and rightfully so – it’s there to support your lifestyle for the years ahead. But it’s just as important to make sure your mind and body are in top shape.
And while we acknowledge your retirement journey is a personal one, there are some things you can do prepare for your transition into retirement and ensure you’re emotionally ready for the changes ahead.
Information correct as at 7 August 2024.