Accessing your super

AMP has shared with us this video that will look at what superannuation is. You can watch the video here or read the transcription below.

Hello, I’m Sue. I work for AMP. I’ve been a financial services specialist for over twenty years. Your super is a big investment, but you can normally only access it once you retire on or after reaching retirement age. While you may not be able to access your super now, you’re free to choose how you’ll take your super once you do retire.

Let’s take a look at your options. Do you want to take it all in one hit as a lump sum? Do you want to take it as an income stream by putting it in an allocated pension product that pays you an income on a regular basis? Would you be better off putting it in an annuity product, where an agreed sum is paid to you over a number of years? Each has different tax arrangements, so you will need to consider what’s right for you.

Let’s look carefully at your choices. Your first option for when you retire is to access your superannuation as a lump sum. The whole amount is then yours to use as you choose. You can invest it in property or any other way you think will give you the growth you want. You can even stick it in a bank account. However, if you then take that lump sum and invest in property or anything else like that, or even in a bank account, you will get taxed on the interest, or possibly on the capital gain.

The second option is very different. It’s an allocated pension, sometimes called an account based pension. An allocated pension provides you with an income stream by paying you money from your super account on a regular basis. The investment earnings on your pension are tax-free, and if you’re over age 60, your income stream payments are also tax-free.

Now, with this allocated pension, it’s your money you’re drawing on, and it will pay you until your super runs out. If you’re choosing an allocated pension, you need to think about the way you’re investing your super, because you want to make sure it’s going to last as long as possible.

Your third option is an annuity. Generally, annuities pay a fixed amount per year, although some annuities have increased to take into account inflation. As a rule of thumb, if the income benefit is $15,000 a year, then that’s it. That’s what you’ve got to survive on. The difference with an allocated pension is that I can change the amount of pension I can receive from year to year, within limits. This year it might be $15,000. Next year, I may want to do a cruise around Alaska, so I need $20,000.

Annuities tend to be a secure and dependable option, but for that, you will be sacrificing flexibility, should your situation change at all. A major consideration is your life expectancy with this option. With all these choices, you need to consider your own personal circumstances, and work out what strategy is most appropriate for you.

Whatever you decide to do, if you actually take an active interest in your retirement strategies now, look at the implications, and make some plans, you can achieve the lifestyle you want when you retire. Start thinking about that now, and you could find yourself with a lot more flexibility and a lot more freedom to enjoy yourself when you do retire.

If you would like Blueprint Wealth to review your personal financial plan, please contact us for a complimentary initial consultation.