Here’s How to Best Use Your Retirement Savings
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Here’s How to Best Use Your Retirement Savings

We all spend our lives working towards that one sweet day when it will all pay off. Years and years of blood, sweat, and tears all boil down to that one pivotal moment. It’s time to retire—finally! Make the most of the nest egg you’ve stowed away. However, for many, the question of exactly what to do with that hefty sum remains.

What’s the Best Way to Use Retirement Savings?

There are several ways to go about dealing with retirement savings when the time comes. Mainly, it boils down to one of the four:

  1. Don’t use it unless absolutely necessary
  2. Pay yourself a pension from your super fund through an account-based pension.
  3. Withdraw it all in a lump sum.
  4. Withdraw some in a lump sum.

In truth, the “best” way is actually your way. Your personal preference matters most in dealing with your retirement savings.

Don’t Forget the Entitlements

Are you receiving payments from your super fund at 60 years and older? Congratulations, whether it’s a pension or a lump sum, you won’t have to pay taxes on your entitlements! No matter how much is withdrawn, the tax treatment will stay as-is.

If you’re 59 years and below, you likely be taxed on your entitlements. Take note that the deciding factor on that is the payment size. Be sure to take these things into account if you’re looking to withdraw from your super in a lump sum.

Super Investments

You could also leave your money in an “accumulation phase”, which is the super you earned when you were still in the workforce. Any earnings from super investments will end up taxed at a 15% rate. Switching to earning capital gains in the fund or any changes in how the super invested will also see the gain taxed at 15%. Take note that the tax can go down to 10% if you’ve had said investment for at least a year or 12 months.

On the other hand, retirement money that’s moved to an account-based pension (sometimes known as an allocated pension) will be tax-free, whether capital gains earned or made from the investment. Some super funds will require the sale of your underlying investments. 

Account-based Pensions

Aside from the tax exemption when over 60 years, using an account-based pension allows for an accessible lump sum anytime. This essentially means that income made through this option is tax-effective. That said, there’s still a limit on how much can be transferred. 

At present, that limit is $1.6 million. It means that the tax exemption of retirement savings has a hard stop. Take note that not everyone offers an account-based pension, so make sure to check for it at the very start.

Summing Up: Speak With A Retirement Planning Expert Today! 

Retirement is one of the most exciting times in a person’s life. It’s the time to make use of all the money that’s been tucked away over the course of your working life. Choose from withdrawing it all or some of it in a lump sum, paying yourself a pension through an account-based pension, or don’t use it unless absolutely necessary.

To learn more about how to have a comfortable and happy retirement life, check out these posts:

Need a retirement planner you can trust? Reach out to Coastal Advice Port Macquarie! We aim to help our clients all over Australia enjoy their retirement.

DISCLAIMER: The views expressed in this publication are solely those of the author; they are not reflective or indicative of RI Advice Group’s position and are not to be attributed to RI Advice Group. They cannot be reproduced in any form without the express written consent of the author. This information (including taxation) is general in nature and does not consider your individual circumstances or needs. Do not act until you seek professional advice. Newcastle Financial Planning Group, Central Coast Financial Planning Group, Sydney Wealth Advisers, Coastal Advice Port Macquarie and Coastal Advice Ballina Byron are subsidiaries of Coastal Advice Group Pty Ltd which is a Corporate Authorised Representative of RI Advice Group Pty Ltd, ABN 23 001 774 125 AFSL 238429.
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