Your superannuation is a big deal – often the largest financial asset after your home. So, it’s important to make smart decisions when accessing it, to ensure your financial security, especially if you’re eyeing a lifestyle shift. Here’s a look at some options:
Option 1: Leave Your Money in Super
Leaving your money in super buys you time. Depending on your retirement income needs and potential government assistance, there’s merit in keeping your money within the super environment. It stays invested, enjoying a concessional 15% tax rate. Without accessing it the balance should continue to grow until you need it.
Option 2: Take a lump sum
Withdrawing your super as a lump sum is considered by many, it has its benefits. If you’re 60 or older, it’s tax-free (in the majority of cases). Whether you’re looking to pay off debts or prefer withdrawing in bits as needed, weigh the benefits against the potential pitfalls.
In some situation having the lump sum outside of superannuation may impact the government benefits you’re eligible for. It can also be difficult to contribute back into superannuation if you change your mind. Also, keep in mind the tax implications if you start investing the money in your name. Earning will be taxed at your marginal tax rate which may be higher than if the money remains invested inside super.
Finally, be cautious about overspending, as splurging may lead to running out of funds sooner. Having a lump sum in your bank account can be harder to manage your cashflow and track your spending.
Option 3: Invest in a Retirement Income Stream
This strategy is popular when tapping into your super. It’s about converting your savings in superannuation into a steady income stream.
If your not fully retired, earnings are still taxed at 15% , there is a maximum that you can withdraw each year and no lump sum withdrawals are available.
Once you’ve officially retired, the investment earnings are tax-free, and if you’re 60 or older, the same tax benefit extends to your income payments.
This approach delivers a consistent income, making it easier to handle your cash flow month to month. With a range of income stream options available, you also get the flexibility to make partial or full withdrawals whenever it suits you, if your fully retired.
The right move for YOU might be one of these, or perhaps a combination of all three. If you’re curious about how these options impact your plans, reach out to our team for an initial chat. We’re here to help you with life’s big decisions.