Superannuation is an integral part of saving for retirement. We often provide SMSF advice and also help clients best manage industry super funds too.
So why do we have superannuation? It is there to help support individuals within retirement, the Australian Government requires employers to make minimum super contributions as part of employee benefits.
There are many ways that superannuation can be managed and invested to save for retirement. There are many elements that go into managing super from defining benefits to having adequate insurance including life insurances. The following may assist you in understanding your superannuation retirement benefits when planning for retirement.
Superannuation is an incredibly important part of retirement planning. In many cases, it is preserved until reaching a condition for release. There are multiple conditions for release with the main one having reached preservation age and permanently retiring from the workforce. Individuals born after 30 June 1964 generally attain preservation age from 60.
Conditions of Release
There are a number of ways members can gain voluntary access to their superannuation savings, called conditions of release. These include:
- Attaining full retirement age, 65
- Employee retirement after reaching 60
- Permanent retirement after reaching preservation age
- Reaching preservation age (where the individual is not permanently retired and receives a restricted income stream. Also known as ‘transition to retirement’ income)
Retirement Income Streams
Many retirees choose to collect their super benefits, as a regular income called a pension to meet their ongoing need for income. There are multiple types of income streams available, some within the super environment and others outside super. These may include strategies such as, account-based pension, transition to retirement pensions, lifetime income and fixed-term income.
Account-Based Income Stream
This is the most common type of pension, which pays a regular income from your superannuation. A minimum amount is required to be taken each year but there is no maximum amount. This can be provided as a pension by a self-managed super fund, retail super fund and a certain employer or industry super fund. They generally provide full access to your capital, making it a flexible option.
Transition To Retirement Income Stream
This is a pension that can be accessed by individuals who have reached preservation age but haven’t yet ceased employment. It works in a similar way to an account-based income stream via superannuation but extra conditions apply.
Fixed Term Income Stream
This allows you to invest your super or non-super money into an income stream (or annuity) that will continue to pay an income for an agreed period of time, from 1 year to 20 years. One of the benefits of this income stream is that you know exactly what income you will receive and it increases with inflation.
Lifetime Income Stream
This allows you to invest your money into a ‘guaranteed’ income stream or annuity that will continue to pay you pension benefits throughout your whole retirement. Like the fixed term annuity, your income is ‘guaranteed’ and you know exactly how much you will receive. The index fund style means your income may keep up with the cost of living, which is a long-term benefit.
Each of these income streams have different benefits to suit different types of retirement, which can be discussed with a financial adviser to discover the best option for your personal needs. Superannuation is an important part of an individual’s financial plan, whether you are in the building wealth stage or you are heading into retirement.
Superannuation is a highly complex area and it is beneficial to have a good understanding when it comes to making related decisions. To gain greater insight into your investment decisions, in regards to your superannuation, you may want to consult a financial adviser, such as Michael at Ethica.
Opportunities within superannuation are continually changing, so you may want to build a relationship with a financial adviser to keep up to date and ensure you are making the most of your superannuation retirement benefits. Ethica Wealth Specialists are offering a FREE 2 Hour Assessment Session that may assist with your retirement planning. Spaces are limited so book in now to secure your appointment.
Australian Taxation Office – https://www.ato.gov.au/Super/
Ethica Knowledge Centre – https://ethica.financialknowledgecentre.com.au/module.php?mid=10&topsection=323