September 21, 2018

You’re About to Retire in Australia. What Happens to Your Super?

There are a couple of ways to access your super in retirement to get the most out of your money.

While you're going through the transition from working to retired, your super funds also change.

It’s 4:20 pm and the work day is nearly done. But this is no ordinary work day. This day your last work day ever! There’s been a cake, a few tears, a golden watch, a bit of box packing, and in a few minutes the workday is going to end and never start again.

Congratulations. Hopefully, you used a superannuation calculator earlier in life to make a retirement plan. If you did, you should be confident that you will live a comfortable life on rewards of all the years of work you did.

While you’re going through the transition from working to retired, your super funds also change. Here’s are the two broad options; take all your money or transfer it into an ‘income stream’.

Take all your money (aka lump sum payment)

After preservation age, retirees can withdraw superannuation and use it as they see fit. The benefit of this is flexibility. If retirees want to purchase a house, go on a holiday, pay for a new car and invest it as they like, then they can.

The downside is they may lose some of the tax benefits of investing through super accounts. While retirees aren’t taxed to take the money out of super, they will likely be taxed at their marginal tax rate on any income it produces once it is outside super. In comparison, the tax rate for gains within super is only 15%. If investments make a significant annual return, depending on the situation, it may be more tax effective to keep it with the super system. To do this, retirees may need to use an income stream.

Income streams


Pensions work similarly to a retirees current superannuation account. In this case, people keep their money invest in funds and receive capital growth and income from these investments. They can choose to receive this income, with or without their own capital. The downside is the income is subject to market performance.


With an annuity, retirees lock in the amount they will be paid each year at the start. So regardless of how the markets perform they will be paid the amount they set at the beginning. This does, however, limit the upside potential of their investments.

The good news is that retirees can mix and match between all the options or swap options later if they change your mind.

They could take a part lump sum, then transfer the rest to an income stream, only to take whatever is remaining as a lump sum in twenty years’ time.

Maximising retirement savings can require some intricate planning based on individual circumstance and desired lifestyle. It is definitely worth discussing your specific needs with an independent retirement planner.

Now you have a basic idea of what the options are with super, all you need to do is solve a much tricky problem; how will enjoy your super balance in Australia?

Are you a recent retiree, we’d love to hear what worked for you at retirement in the comments section below.

About the author  ⁄ Marxa Dillan

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