Turning 60? Here’s What to Consider With Your Super
Turning 60 can feel like just another birthday, but when it comes to superannuation, it is an important financial milestone.
Around this age, new options may become available. Depending on your circumstances, you may be able to access your super, start an income stream, continue making contributions, or reconsider how your retirement savings are invested.
That does not mean you need to make major changes as soon as you turn 60. What matters is understanding your options and considering how they fit with your longer-term retirement plans.
Here are five key areas to consider.
1. Your super may need to stay invested for many years
Retiring from work does not necessarily mean retiring from investing.
Your retirement could last for several decades, so your super may remain invested long after you stop working. Moving everything into cash or very conservative investments simply because you have turned 60 may affect the long-term growth potential of your savings.
On the other hand, maintaining a higher-risk investment allocation may expose your savings to greater fluctuations, including when you may be making withdrawals.
The appropriate investment approach will depend on your individual circumstances, including your expected spending, other assets, income needs, tolerance and capacity for investment risk, and expected retirement timeframe.
The key point is that turning 60 does not automatically mean reaching the end of your investment journey.
2. Understand when you can access your super
Turning 60 can affect your options for accessing super, but reaching age 60 by itself does not necessarily give you unrestricted access. You generally need to satisfy a condition of release.
If you are still working and have reached preservation age, you may be eligible to commence a transition to retirement income stream. This allows eligible people to receive an income stream from super while continuing to work, although withdrawal limits and other rules apply.
Other conditions of release can provide broader access to super. For example, ceasing an employment arrangement on or after age 60 can be a condition of release in certain circumstances. From age 65, you can generally access your super regardless of whether you continue working.
However, being able to access your super does not necessarily mean withdrawing it will be appropriate for you.
Before making a significant withdrawal, consider both your immediate objective and the potential impact of having less money invested to fund your future retirement needs.
3. Turning 60 doesn't mean you have to stop contributing
A common misconception is that once you reach retirement age, super becomes a one-way street: money comes out and nothing goes back in.
That is not necessarily the case.
Depending on your age and circumstances, you may still be eligible to make concessional or non-concessional contributions. Super funds can generally accept certain voluntary contributions up until 28 days after the end of the month in which you turn 75.
Different eligibility requirements can apply to particular contributions and tax concessions. For example, if you are aged 67 to 74 and want to claim a tax deduction for a personal super contribution, you may need to satisfy the work test or qualify for an exemption.
Contribution caps and other eligibility requirements also apply, while special types of contributions, such as downsizer contributions, have their own rules.
The important point is not to assume that the super contribution door closes when you turn 60. The years leading into and during retirement may still provide opportunities to review how your retirement savings are structured.
4. Consider whether starting a pension is appropriate
Another decision you may face is whether to keep your super in accumulation phase or, if eligible, transfer some of it into retirement phase by starting an account-based pension.
This can have important tax consequences.
Investment earnings in a complying super fund are generally taxed concessionally during accumulation. Subject to the relevant rules, investment earnings on assets supporting a retirement-phase income stream may be exempt from tax.
However, limits apply to the amount that can be transferred into retirement phase, and account-based pensions are generally subject to minimum annual payment requirements.
Starting a pension can affect how your retirement savings are held, invested and paid to you.
Some retirees may maintain both an accumulation account and a pension account. The appropriate structure will depend on individual circumstances, including retirement income needs, assets, tax position and longer-term plans.
5. Don't forget what happens to your super when you die
Estate planning may not be the most exciting subject to accompany a 60th birthday, but super deserves a place in the conversation.
Superannuation does not automatically form part of your estate in the same way as many personally owned assets. Who can receive your super, how a death benefit can be paid and its tax treatment depend on the circumstances and arrangements in place.
Tax treatment can also differ depending on the recipient, including whether the recipient qualifies as a death benefits dependant for tax purposes.
You may also hear about withdrawal and recontribution strategies. Broadly, these can involve withdrawing eligible super benefits and recontributing amounts to super, potentially changing the taxable and tax-free components of a super interest.
Such strategies can have significant tax, contribution-cap and eligibility implications and will not be appropriate or available in every situation. The consequences should therefore be considered carefully before taking action.
It is also worth reviewing your beneficiary nominations alongside your broader estate plan so that your arrangements continue to reflect your intentions.
Turning 60 is a checkpoint, not a deadline
Turning 60 does not mean you suddenly need to overhaul your super. Instead, it can be a useful financial checkpoint.
You might review how your super is invested and whether the level of risk continues to reflect your circumstances. You can check when you may be eligible to access your savings, consider whether continuing to contribute fits with your plans, explore the implications of moving some super into retirement phase, and review your estate planning arrangements.
Retirement planning is not simply about reaching a particular age. It involves considering how your savings and other resources may support your needs and objectives in the years ahead.
Important information
Superannuation and taxation rules, thresholds and contribution caps can change over time. Eligibility to access super, make contributions, commence an income stream and use particular retirement strategies depends on individual circumstances. Current requirements should be confirmed before taking action.
The information in this article is general in nature and does not take into account your objectives, financial situation or needs. It does not constitute personal financial, taxation or legal advice. Consider whether the information is appropriate for your circumstances and seek suitably qualified professional advice where required. Before making a decision about a financial product, consider the relevant disclosure documents.
