There are some crucial details concerning the advantages and changes that may influence you if you are considering retirement in Australia. Here are some of the key considerations:
- Benefits: The Age Pension, an income support benefit for elderly Australian citizens, may be available to you depending on your age, assets, and income. Every two weeks, the government pays Centrelink to distribute the Age Pension. As of September 20, 2023, the maximum basic rate for an individual is $1,002.50 per fortnight, and the maximum basic rate for a couple is $1,511.40 per fortnight (combined). Additionally, you can receive supplements to cover your energy costs. Age Pension applications may be submitted online, on paper, or with assistance from a member of the Services Australia team.
- Leave: You could potentially be eligible to get payment for all accumulated annual leave if you’re retiring and leaving your employment. However, any unused long service leave or sick leave will not be reimbursed to you. To find out what rights you have, consult your award or employment contract. Before retiring, you might also need to give notice to your employer.
- Superannuation: You can access your superannuation when you reach your preservation age, which is between 55 and 60 depending on when you were born. You have several options for how to use your super in retirement, such as: (Conditions of Superannuation release)
- Holding onto the funds in your super account until you need them (during the “accumulation phase”). This manner, your balance will continue to be invested without you having to take any withdrawals from it. You will still continue to pay 15% tax on your super’s earnings.
- Start a pre-retirement income. If you have met your preservation age but not yet retired, you can commence a transition to retirement pension which allows you to draw some of your retirement savings as an income (subject to a maximum of 10%). This can allow you to reduce your work hours or take advantage of certain tax concessions.
- Taking a lump sum distribution of all or part of your super. This may provide you more flexibility and control over your money, but depending on your age and other variables, you might also have to pay tax on the amount you withdraw. The duration of your lump sum and if it will alter your eligibility for the Age Pension or other benefits are other things to think about.
- Transferring all or a portion of your super to an account-based pension. You can take regular withdrawals from your super account for this type of income. As long as you fulfil the minimal annual withdrawal amount imposed by the government, you are free to determine how much and how frequently you receive payments. Your account-based pension has tax-free earnings, but the payments you get might be taxed based on your age and other circumstances. The transfer balance cap—a ceiling on the amount of super you can move into retirement phase income streams—will also apply to your account-based pension. As of July 2023, the cap is $1.9 million.
Before you decide what to do with your superannuation in retirement, book a meeting with the team from Funded Futures and compare different options based on your personal circumstances and goals.
These are some of the main aspects of retiring in Australia that you should be aware of. However, there may be other factors that affect your retirement planning, such as health care, aged care, estate planning and lifestyle choices. Therefore, it is important to do your research and plan ahead for a comfortable and enjoyable retirement.
For more tips on how to prepare for retirement, see Prepare to retire on the Moneysmart.gov.au website.