It’s true that superannuation is a fantastic way to build wealth for your retirement, but once you retire there may be better investment alternatives.
Here at Precision Wealth Management, our North Brisbane based certified financial planners work with each client to review their current superannuation plan, and determine the best strategy to build wealth for their future.
In this blog we explore superannuation withdrawal in Australia, including:
- What is preservation age
- Options for superannuation withdrawal
- When it’s worthwhile to move your money to a non-superannuation investment
Learn more below or watch the video here: Should retirees withdrawal their superannuation?
What is Preservation Age?
Preservation age is the age at which you can access your superannuation once you retire, or begin moving to a retirement income stream. The age differs depending on your date of birth.
You can learn more about it at the ATO website here.
Superannuation Australia: Options for Withdrawal
There are 3 main options for superannuation withdrawal in Australia.
- Super lump sum payment: Depending on your super fund, you may be able to receive your entire superannuation in a single payment.
- Super income stream: Regular payments can be set up from your super fund. They are distributed at least once a year and are popular as they enable retirees to keep track of their income and spending.
- Combination of lump sun and income stream
The amount of tax a retiree pays may be dependent on the withdrawal option they pick.
Withdrawing Superannuation After 65
The team at Precision Wealth Management believes some retirees would benefit from withdrawing their super and investing it into a non-superannuation fund.
This is a strategy older couples may consider, particularly if they have two separate super accounts but is dependent on the amount available in super.
As you’ll see in the video, we use a scenario where a couple have a combined $450,000 superannuation and no other taxable income.
In this instance, a good strategy is to recommend the couple withdraw the money from their two super accounts, combine their funds and invest the entire amount into a non-superannuation fund.
- Better return on investment due to lower fees:
- Lower administration costs because with only one account, you’ll only pay one set of fees. As opposed to two (2) sets of fees with two (2) super accounts.
- Super funds tend to be slightly more expensive than non-super investment funds.
- Simplicity around estate planning:
- If the combined non-super fund is in joint names and one person passes away, the remaining balance will be transferred to the surviving member.
- Negate any possible death benefit taxes:
- A non-dependant beneficiary would pay 17% on the taxable component of the super, should the retiree pass away (if it were in the one name). However, once the funds have been taken out of the superannuation environment, this death benefit tax no longer applies.
Superannuation Withdrawal Australia
While this superannuation withdrawal strategy will be beneficial for some, it won’t provide the best outcomes for everyone heading into retirement which is why it’s important you seek tailored financial advice from a qualified financial planner.
If you have other income streams outside of super, or those with larger pension amounts (closer to $1 million), we encourage you to reach out to us to discuss an alternative approach that will better suit your financial situation.
If you have any further questions, or would like to discuss your investments with our qualified financial planners on Brisbane’s northside, please don’t hesitate to reach out to us today.