Reaching your superannuation preservation age signifies the first time you can access your super.
It’s like being handed your parents’ car keys for the first time as an adventurous 17-year old. The places you can go are endless and the long-awaited freedom is now a reality.
But, just like any P-plater, there are a few rules you need to abide by before becoming a fully-fledged retiree.
How Much Super Can I Withdraw At Preservation Age?
The amount of your super that you can withdraw once you reach your superannuation preservation age is determined by your employment status.
However, regardless of your employment status, you can access your superannuation accumulation balance in the form of a transition to retirement pension, even if you are still working.
Your preservation age is determined by the year and month you were born, as shown in the table below:
|Date of Birth||Preservation Age|
|Before 1 July 1960||55|
|1 July 1960 – 30 June 1961||56|
|1 July 1961 – 30 June 1962||57|
|1 July 1962 – 30 June 1963||58|
|1 July 1963 – 30 June 1964||59|
|After 30 June 1964||60|
What is a Transition to Retirement Pension?
A Transition to Retirement (TTR) Pension is an income stream that you can commence with your super accumulation savings once you have met your preservation age.
A TTR pension allows you to receive an income of between 4% and 10% of your account balance each financial year. For part years, the 4% is pro-rata, based on the number of days remaining in the financial year; however, the 10% remains accessible, even if the TTR pension was started part way through a year.
If you are over age 60, TTR Pension income is generally completely tax free. If you are under age 60, the taxable component portion of your pension income is assessed at your individual tax rate, minus a 15% offset. Speak to your super provider about the taxable component ratio of your current super balance.
It may be beneficial to not use your total super accumulation balance to start a TTR pension and, instead, leave a small balance in your accumulation balance, so that you have both an accumulation account and a TTR pension account. This reasons for this include:
- Your accumulation account remains open to accept future contributions from either you or your employer (because super contributions cannot be made to a TTR pension account), without the need to set up a new account and inform your employer of new account details.
- Your accumulation account remains open to allow any insurances within your super account remain in place and that the balance can continue to cover the premium costs. If the account is closed or the balance is insufficient to cover premiums, the insurance could be lost.
TTR Pension Example
Angela is 61 years of age and has $400,000 in super. She has insurances within super that she would like to retain. Angela uses $380,000 of her super balance to start a TTR Pension on 1 July and leaves the remaining $20,000 in the accumulation account, so that the account remains open to accept future employer and salary sacrifice contributions and so that the insurance premiums can continue to be funded.
Angela can choose to withdraw between 4% and 10% of the $380,000 TTR Pension balance in the first 12-months, which equates to an income of between $15,200 and $38,000 for the year. This can usually be withdrawn fortnightly, monthly, quarterly, half-yearly or annually. Then, on 1 July of the following year, the 4% and 10% is recalculated based on the balance at that date and so on.
Over Preservation Age But Under Age 60
How much super can you withdraw if you are over your preservation age, but under age 60?
If you are over your preservation age, but under age 60 you can start a TTR Pension, regardless of whether you are still working or not.
If you are over your preservation age, but under age 60 and you have retired, with no intention of returning to full-time or part-time work ever again, then you simply need to notify your super fund that this is the case and you will have full, unrestricted access to your super. This means you can make lump sum withdrawals as large as you like and/or start an account based pension with no maximum limit on the income you can receive (there is only a minimum requirement).
However, you need to keep in mind that lump sum withdrawals over the lifetime low rate cap amount may incur tax – depending on the tax components of your super.
Account based pension income under age 60 may also incur tax – depending on your other sources of income and the tax components of your super.
Over Age 60, but under age 65
How much super can you access if you are over age 60, but under age 65?
If you are over age 60 you can start a TTR Pension, regardless of whether you are still working or not.
If you are over age 60 and, either:
Retired and have no intention of returning to full-time or part-time work ever again; or
Have an employment arrangement come to an end after reaching age 60;
then you simply need to notify your super fund that this is the case and you will have full, unrestricted access to your super as a lump sum and/or account based pension.
There are generally no tax implications as a result of withdrawing your super when over age 60, unless your super balance includes a taxable (untaxed) component. Ask your super provider if this applies to your super balance.
Related article: When Can I Access My Super Tax Free?
Over Age 65
How much super can you access if you are over age 65?
If you are over age 65, there is no restriction on how much super you can access, even if you are still working. Reaching age 65 is classified as a full superannuation condition of release, meaning you have full access to your super, which can be withdrawn as a lump sum or income stream.
Superannuation Preservation Age Calculator
If you are unsure of your preservation age, you can use this calculator to determine your superannuation preservation age.
Remember, just because you can access your super, it doesn’t necessarily mean you should. There are a number of retirement planning strategies you can put in place in the lead-up to retirement, but just make sure you are confident with how to drive before you go turning that key. Because once you pull out of the driveway, mistakes and misjudgements can be expensive.
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