You may be able to draw an income from your superannuation before you retire.
If you are considering retiring or transitioning to retirement, you have the option of opening an account-based pension.
This will provide an income stream based on your superannuation savings, but only as long as you have reached preservation age.
Preservation ages depend on when you were born, as follows:
An account-based pension pays income in retirement or if you are still working, it can supplement your wages.
Some working individuals may be able to draw income from an account-based pension and salary-sacrifice an amount from their wages into superannuation to legitimately lower their taxes.
The account-based pension is opened with a lump sum from your super account.
There are some conditions that must be met: for example, permanently retiring from the workforce after reaching preservation age, reaching age 65 or becoming totally and permanently disabled.
If you intend to keep working, you need to start a transition to retirement pension (TTR) in order to access part of your super through an account-based pension.
Under these circumstances, the sum you deposit in the account must be a minimum of four per cent and no more than 10 per cent of your super balance. You cannot withdraw a lump sum if you are still working. Rather, the amount that goes into your account-based pension creates an income stream.
Your TTR pension can be rolled back into your super accumulation account at any time, according to MoneySmart.
Account-based pensions are not guaranteed to last for a set period of time. How long your pension lasts will depend on how much you withdraw each year, the investment returns you receive and the amount of fees you pay.
To calculate how long your account-based pension might last, use the calculator on the MoneySmart website.
Before deciding to open an account-based pension, speak to an adviser from your superannuation fund in addition to an accredited, independent financial adviser specialising in retirement matters.
Would you consider opening an account-based pension before fully retiring? If you have already done this, how did it help to improve your cashflow?
Finding it hard to keep up-to-date with retirement rules? The RetirePlanner™ tool has all the information you need.
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