Learning how super works helped Helen and Joe plan their future
Helen and Joe had both retired earlier in the year and were struggling to work out what to do with their superannuation accounts.
They are homeowners and have been able to retire debt free, and they both receive a part Age Pension.
“We don’t have a lot of savings,” explained Joe. “We’ve both always worked, and we’ve raised three kids, and helped them out a bit over the years. We have some superannuation each – we didn’t put extra in, but we have what our employers paid in. We wanted to use some of that money now that we’re retired, but we didn’t know the best way to do that.”
Doing their sums
Helen and Joe used the Moneysmart budget planner to work out what their regular costs would be in retirement.
They worked out that an extra $600 per fortnight, on top of their Age Pension, would meet all their expected costs in retirement, with some extra left over.
Super fund seminar
Helen and Joe registered to attend an online retirement seminar that their super fund was running.
“It was very helpful,” said Helen. “The presenter explained the difference between different types of superannuation accounts, such as accumulation accounts and retirement income accounts. And explained how different types of super accounts are taxed.”
|
Account type |
Used for |
Tax on investment earnings |
|
|
Accumulation account |
Paying your super into while you’re working. |
15% |
You can keep this type of account in retirement if you like, and take lump sums from it. |
|
Account-based pension |
This type of account pays you a regular income stream. You can also take out bigger amounts when you want to. |
0% |
You can close your account-based pension at any time. You can take lump sums when you want to. And you can vary the amount of regular income you take. |
|
Transition to Retirement account |
Used between the ages of 60 and 65, if you want to start using your super but you're still working. |
15% |
You can generally convert this back to an Accumulation account. |
| Also offered by some superannuation funds, although not a superannuation account | |||
| Lifetime income stream/annuity
|
These are not superannuation accounts, but they’re offered by some super funds. This type of account pays you a regular income for the rest of your life. |
Traditional annuities don’t have investment earnings to be taxed, while investment linked annuities have tax free earnings if bought using super money. |
You normally cannot close an annuity or change its payments once the cooling off period has finished. |
From attending the seminar and further reading that they did afterwards, Helen and Joe decided that they would keep Helen’s superannuation in her accumulation account for now, and would put Joe’s superannuation into an account-based pension.
They used the Moneysmart account-based pension calculator to work out that they could take a $600 per fortnight income from the account-based pension, and that the projections showed the account would not run out until Jon was more than 100 years old.
“Putting my super into an account-based pension made sense for me, because I wouldn’t pay any tax on the investment earnings. And more importantly, it would give us the extra $600 per fortnight that we wanted,” said Joe.
“I also like the fact that it’s flexible. We can change the payments or close the account at any time, if we want to do something different. And we can take lump sum amounts out if we want to.”
“We never really understood how superannuation worked. I’m thankful we went to the seminar. It gave us the confidence to learn more about our super and retirement.”
The case studies on this website are provided for illustrative and educational purposes only, they are general information. You should seek advice from a suitably qualified professional regarding your own circumstances.