Retirement Planning – Superannuation
Funding the lifestyle you want to lead Superannuation, or ‘super’, can take a long time to build, especially when you are trying to put as much into your super to best achieve your ideal retirement.
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here are many different avenues you can take when choosing an option for funding your life after retirement, but you need to make sure you choose an option that fits your circumstances and assists in providing some return to keep your superannuation growing whilst you use it, to avoid running out of money later on.
Seeking advice The legislation around super can be very tricky to understand and navigate, and can also incur serious consequences if not adhered to appropriately.
that balance over time and it is subject to market fluctuation. So you run the risk of running out of superannuation if you don’t invest it in a way that enables you to achieve some growth.” It’s important to remember that under normal circumstances you can only touch your super once you reach your “preservation age”, which is currently between 55-60 years of age depending on when you were born, and there are laws around how you take out your superannuation.
Funding options When the time comes that you need to access your super to pay for your day-to-day living expenses you’ll need to meet a “condition of release” before your funds will be made available. You need to contact your super company to apply for a condition of release. There are a number of different options for funding your retirement lifestyle: ◆ Account based pension Transferring all or part of your super into an account based pension enables you to start receiving regular income payments. There is a minimum amount you need to withdraw each year based on your age and the balance of the account. The longevity of your account depends on how your account is
invested, how much income you draw and how markets perform over time. ◆ Super lump sum Once reaching your ‘preservation age’, you may be able to withdraw all or some of your super as a lump sum, also known as cash, and place it in your bank account. If you are under 60, you will need to pay tax on lump sums over $205,000, withdrawals after age 60 are tax free. What you do with your super lump sum after you withdraw it may affect your eligibility for age pension. Additionally, if you take a super lump sum and spend a large amount of it, it leaves less super to last during your life. ◆ Annuities Investing a lump sum of your money into an annuity, with either a super fund or life insurance company, that will pay you a regular income for a chosen duration or for life. Your income payments are guaranteed, no matter the market performance or interest rate changes, but you may not have the ability to withdraw more money if you need it. ◆ Term deposit You invest a lump sum of money for a fixed period of time into a fixed interest rate with a financial institution such as a bank. Generally, the money only becomes available to withdraw
Jennifer Langton, Specialist Advice Manager for Aware Super, says it is important to seek advice over one of the most important financial decisions you can make in your lifetime. Ms Langton gives an example, saying, “Once you roll super into a pension and start taking income from that, then you are reducing YourRetirementLiving.com.au
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