Staying in the super system
In this article, we cover the different ways that staying in the super system could benefit you in retirement.
When you leave the security of the SASS scheme and meet specific criteria, the savings you’ve had locked away suddenly become available. Whilst you might feel tempted to take your benefit as a lump sum to pay off your mortgage or splurge on that long-awaited renovation, you’ll need to have enough self-discipline and skill to manage your money for the rest of your life.
Another option is to have your savings invested in the accumulation phase of the super system. By doing this, you’ll continue to enjoy a reduced tax rate of 15% on your earnings.
And if you roll your super into the retirement phase and set up a retirement income stream such as an account-based pension, there’s no tax on your earnings. Once you reach age 60, you’ll pay no tax on any payments you receive either. There is a generous amount that you can transfer to the retirement phase of Super, $1.9 million for the 2023/ 24 financial year.
But there are other benefits to rolling over into the retirement phase of super:
- A regular income – When you’ve spent your working life receiving a regular salary, the prospect of not having a regular income can feel daunting. Setting up a retirement income means that you can continue to enjoy regular payments, and perhaps more peace of mind as you enter retirement. A regular income can also help you budget for your lifestyle and keep on track with your retirement plan.
- Staying invested – Staying in the super system means that your savings stay invested, giving you the opportunity to help your nest egg last. You’ll get access to a range of flexible investment options designed to suit your retirement needs and the level of risk you’re comfortable taking.
- Access to investment opportunities – By staying in super, you’ll have access to professional investment managers and diverse investment opportunities not typically accessible to retail investors. Those same funds provide an opportunity to spread your money and diversify your risk across different asset classes. By having a good mix of investments, you can minimise the risk that your investments lose value at the same time and increase your chances of a better overall return.
To learn more about how the retirement phase of super works, you can watch this month’s video.
What to look for when choosing a retirement income product
If you’re drawn to the idea of a regular income in retirement and want to explore your options, what features should you be looking for in a retirement income product?
- Ease of withdrawals – look for something that offers you the flexibility to withdraw your money as and when you need to. With an account-based pension for example, you can access a lump sum at any time.
- Minimum investment amount – make sure to check the minimum investment required to set up the income stream. With an account-based pension, there’s usually a set minimum investment, but you get to decide what payments you receive, and when.
- Clear fee structure – when shopping around for any financial product, you should be looking for fees that are clear and easy to understand. If it’s not clear how much you’ll be paying in fees, you could be paying more than you expect.
- Product ownership – do your research to make sure the provider offering you the product is financially stable and trustworthy. If you’re going to part with your savings, you need to know they’ll be in safe hands.
Like all big financial decisions, it’s important to assess which option best suits your lifestyle and aspirations in retirement. If you need help deciding what to do with your SASS benefit, an Aware Super planner1 can review your personal circumstances, talk you through each option and ultimately help you make a more informed decision.
1 Financial planning services are provided by our financial planning business, Aware Financial Services Australia Limited, ABN 86 003 742 756 AFSL No. 238430.
This is general information only and does not take into account your specific objectives, financial situation or needs. Seek professional financial advice, consider your own circumstances and read our product disclosure statement before making a decision about Aware Super. Call us or visit our website for a copy.
Issued by Aware Financial Services Australia Limited ABN 86 003 742 756, AFSL No. 238430. Aware Financial Services Australia Limited is wholly owned by Aware Super ABN 53 226 460 365. The trustee of Aware Super is Aware Super Pty Ltd ABN 11 118 202 672, AFSL 293340.
