Turning 60 is a significant milestone in your superannuation journey, as it can unlock access to your retirement savings in ways not previously available. Understanding these changes can help you make informed decisions about your financial future[1].
Accessing Your Super Without Penalties
A common misconception is that you must wait until the Age Pension age (currently 67) to access super. Once you turn 60 and meet a condition of release, you can access your superannuation without the restrictions that apply to younger members. After 60, if you’re retired or have ceased an employment arrangement, you can withdraw your super as a lump sum or commence a pension.
Transition to Retirement Benefits
If you’re still working, once you turn 60, a Transition to Retirement (TTR) pension allows you to access up to 10% of your super balance annually while continuing employment.;. For someone with $400,000 in super, this means access to up to $40,000 per year while still working. You can use this strategy to boost your income, reduce working hours, or salary sacrifice more into super while supplementing your take-home pay with TTR payments.
The pension payments from a TTR pension are tax free but the investment earnings within superannuation continue to be taxed at up to 15%.
Tax-Free Pension Phase
Perhaps the most significant advantage is the tax treatment of superannuation in pension phase[2]. Once you turn 60 and commence a retirement phase account-based pension, both the pension payments and investment earnings within your super fund become completely tax-free. This means a $50,000 annual pension payment results in $50,000 in your pocket – no tax deducted. For example, Sarah is 61 and has $500,000 in super. She ceases an existing gainful employment and commences a pension, paying $50,000 annually. Not only does she receive this income tax-free, but the remaining $450,000 continues to grow within the fund without any tax on investment earnings.
Approaching 60 opens new possibilities for accessing and making the most of your superannuation. The key is understanding your options and making decisions that align with your retirement goals and financial circumstances.
The information contained in this article is general information only. It is not intended to be a recommendation, offer, advice or invitation to purchase, sell or otherwise deal in securities or other investments. Before making any decision in respect to a financial product, you should seek advice from an appropriately qualified professional. We believe that the information contained in this document is accurate. However, we are not specifically licensed to provide tax or legal advice and any information that may relate to you should be confirmed with your tax or legal adviser.
[1] This article is referring to taxed superannuation products only. If your superannuation is held in an untaxed superannuation scheme, e.g. defined benefit fund, the outcome may differ.
[2] There is a lifetime cap on the amount you can transfer into a tax-free superannuation pension, currently $2,000,000. Exceeding the cap can result in ATO penalties.