What happens to your super when you retire

Superannuation is designed to be an income source in retirement. It is there to help fund your life when you stop working.

You decide what happens to your super when your reach retirement. Your decisions will be unique to your personal situation.

Your super on day one of retirement

As soon as you stop working, your (former) employer will stop contributing to your super account. Any other contributions arranged through your pay will also end

What happens next is up to you. You get to make decisions about your money.

You can use your super in several ways, including as a regular income with ongoing payments or withdrawing a lump sum to pay out debt or make a purchase. Or you could choose a combination of options.

When can you get your super?

Accessing super is not automatic. Generally, you need to reach a certain age and have stopped working. There are some other circumstances where you might be able to access your super.

In most cases, you can access your super when:

• You have reached 'preservation age' and are permanently retiring from the workforce. Permanently retired means you do not intend to work in paid employment for more than 10 hours a week

or

• You have reached 65 years of age. At that age, you have unrestricted access to your super, even if you have not retired

Other situations in which you may be able to access your super before you retire and reach preservation age include:

• permanent incapacity
• severe financial hardship
• compassionate grounds
• terminal illness
• temporary residents permanently leaving Australia

You must meet set criteria to be eligible to access your super through these options. See getting your super for more information.

Decide what happens to your super

You have several options of how you use your super. You can:

• leave your super as it is, it will continue to be invested.
• set up a stream of regular payments flowing from your super account by opening an account-based pension or purchasing an annuity.
• withdraw a lump sum that might be used to pay down a debt, such as a home loan, or used to make a purchase, like a holiday.
• withdraw all your super.
• choose a combination of an income stream and a lump sum.

Once you have taken money out of your retirement savings, you may not be able to put it back in, so choose carefully. It's important to consider all your options when making these big financial decisions. Consider seeking financial advice.

When you’re ready to make a decision, contact your super fund.

See retirement income sources for more details.

If you have a defined benefit super plan, you will have different options. For example, some defined benefit members may be entitled to a lifetime pension and/or a lump sum benefit. A lump sum can be withdrawn as cash or rolled over to a defined contribution super account. Talk to your super fund or employer for the details.

If you have a self-managed super fund (SMSF) you should understand your role and responsibilities as an SMSF trustee. If you are unsure about how you can access your super, speak to your financial adviser, SMSF administrator or accountant. See self-managed super funds (SMSF).

How super is taxed

Most people will not pay tax when they withdraw their super because access to super generally starts at age 60 and payments from super to people aged 60 or over are generally tax free.

Some payments from super are taxable, particularly if you are under 60 years.

The amount of tax you pay depends on a range of factors, such as:

• your age
• the reason for withdrawal
• the taxable components, and
• whether you withdraw your super as an income stream or lump sum.

You can generally choose one or a combination of withdrawal options. Super withdrawals can affect your entitlements to income support payments and allowances.

See tax and super for more details and consider seeking financial advice before you decide to withdraw your super.