How to make your super last

Making the best decision on how to use your superannuation to help pay for your future lifestyle is critical.

There may be a temptation to simply withdraw your balance as a lump sum to fund your retirement. Through clever investment and savvy saving you may be able to make the most of this money, but ask yourself, ‘what happens if it runs out or your investments don’t quite perform as you had hoped’?

Many will consider the Government Age Pension as a reliable back-up plan.  While this may seem possible today, legislation changes in the future could make you ineligible or left with much less to live on than you had anticipated.

For a growing number of Australians, super will be the cornerstone of their income in retirement. Opting for an income stream from your super, potentially combined with Age Pension payments, may be the way to make your savings last longer.

Increasingly, retirees are transferring their super savings into income stream products. These include account–based pensions that convert your super into regular payments, providing a steady income in retirement. Not only do account-based pensions give you flexibility to access your savings when you need a little extra money, but your balance continues to be invested by experts, and the earnings added to your account, which can help extend your savings.

If your financial circumstances allow, you may also be able to claim a part Age Pension to supplement income from your super. For an estimate of how much you could receive, simply enter a few details into AustralianSuper’s Income Calculator

One other product that can offer a regular income in retirement is an annuity, which pays a guaranteed income for a defined period of time at a fixed rate of return. This option can give peace of mind that your money won’t run out or be impacted by market forces. However, annuities can lack flexibility. Unlike account-based pensions, there are limitations on withdrawing money. Should your circumstances change, this may not be ideal, particularly when at times when you need access to a larger sum of money. There is also a risk that your payments may not keep up with inflation as the rate of interest is fixed at the outset.

Possibly the most important decision to make about retirement is how you will fund it, and make your hard-earned savings last as long as you do. Getting advice on the best way to use your super is an essential step to help you weigh up your options and ensure that you’ve got the right strategy in place so that you can enjoy your post-work years.

This article has been sponsored by AustralianSuper Pty Ltd ABN 94 006 457 987, AFSL 233788, the Trustee of AustralianSuper ABN 65 714 394 898. The views expressed are those of YourLifeChoices and not necessarily the views of AustralianSuper. The article contains general information and you should consider your personal financial situation before making a decision.  

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