The whole point of superannuation is to help us build up some extra savings to support us when we retire.
For most people that means using your superannuation to supplement your age pension.
But for others who've been lucky enough to have earned or acquire a lot of money through their working lives, it could mean they have too much money and aren't eligible for the age pension. People who fall into this category will be self-funded retirees.
Either way, sooner or later every one of us will start thinking about when we should retire and how we should organise ourselves.
For most of us, this happens when we're in our 50s and by around our late 50s or early to mid-60s we start thinking about actually retiring, how we might do it and when.
When you start to seriously make these plans, you'll quickly discover how vague it can seem. This is because:
When retiring, there are two ages that you need know about:
To 'retire' used to mean that you've officially stopped working, that is, stopped paid employment, and formally left the workforce. You can do this any age you like.
But if you want to access your superannuation savings, you can only do this after you've reached a certain age, known as your preservation age.
And if you want to also get the age pension, you'll have to be a certain age and your income and assets have to fall below specific thresholds.
You just need to watch out for the 10-hour rule - if you're younger than 60 years of age, your super fund will need you to declare that you don't intend to work more
than 10 hours per week. If you're aged 60 to 64, you don't need to make this declaration.
If you're 65 or older, you can start accessing your super anytime you like.
So in practical terms, retirement for most people simply means you've decided it's time to start drawing down some of your superannuation savings as either a lump sum or as a retirement income stream and that you don't intend working more than 10 hours per week.
When you retire, make sure you swap your superannuation account balance into a retirement account.
This is because retirement accounts are tax free for most people. If you leave your money in an accumulation product you'll pay nominal tax of 15% on your earnings.
To be eligible to receive the age pension you have to satisfy two social security tests - the assets and income tests, that is, fall below their thresholds.
The tests have different thresholds for retired single people and retired couples, and depend on whether or not you own your own home.
For example, if you're in a couple relationship, in most situations, you will be eligible to receive the age pension after you turn 67 and (if you own your own home) have less than $470,000 in other assets, such as investments, savings and superannuation.
If you don't own your own home, you can have up to $722,000.
If you have more assets, you and your partner may still qualify for a part pension if you have less than $1,031,000 (if you own your own home) or $1,283,000 (if you don't).
To gain access to your superannuation savings you will usually have to satisfy the following conditions:
Even if after you've retired you can go back to work, that is, work in paid employment for more than 10 hours per week.
You will pay PAYE tax on your employment earnings like you did before you retired and you will be able to start making concessional contributions to your super fund again.
Should you start working again, payments from your superannuation fund will generally be tax free after you're over the age of 60. But if you're receiving the age pension, if you earn more than $212 per fortnight, your pension will be reduced; if you earn more than $2,444.60 per fortnight, you will not receive the age pension for that fortnight.
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