What’s the best way to retire? Grab your superannuation cash and splurge it all at once? Or take it a bit at a time, over a much longer period?
Some may want to take a “lump sum” approach – we’ve worked hard for many years to put away our super; now it’s time to make the most of it.
But these days, many retirees are deciding that making the most of their super means making it last as long as possible.
Setting up a retirement income stream is one way of helping your money go further. It simply means withdrawing set amounts of your super at regular intervals – weekly, fortnightly, or monthly – to help cover your living expenses.
Often it can be combined with a full or part age pension, making your day-to-day life significantly more comfortable.
A super retirement balance of $150,000 delivers a weekly income of $163 over and above a standard Age Pension. That’s a 38% increase in retirement income.1
It doesn’t even necessarily mean “losing” money. By withdrawing only small amounts, most of your money can stay invested, just as it was while you were working.
Anne and Nick, two retirees from Torquay, Victoria, had an even nicer surprise: “After four years, we had more money than we started with,” says Anne.
“That was pretty amazing, so we’re very happy with AustralianSuper,” said Anne.
Anne and Nick now alternate between two fortnightly payments, essentially giving them a weekly income: the government age pension one week, a small amount of super the next.
“We have plenty of money to go out, to pay for groceries… any major bills we might have coming in, then we can withdraw that as a lump sum”.
According to Paul Schroder, AustralianSuper’s Group Executive, Membership, “More and more of our members are now seeing the value of taking their super as an income stream, in conjunction with the age pension.’’
“An income stream is similar to receiving a regular pay packet in retirement, with the additional benefit that you can still access your money at any time, for one-off or unexpected expenses,” he says.
Taking your super as a lump sum has its own potential pitfalls. If you spend it all too soon, you may leave yourself with the age pension as your only source of income.
And even transferring the money to an interest-bearing account, like a term deposit, means you might earn far less on your money than you could get elsewhere.
Have you drawn on your super yet? Have you considered turning it into an income stream? And which option do you feel would be better for you? Share your thoughts in the comments below.
This post was sponsored by AustralianSuper Pty Ltd ABN 94 006 457 987, AFSL 233788. It was written as we feel it delivers valuable insights into a subject important to the Starts at 60 community. The views expressed in this article are those of Starts at Sixty and the individual AustralianSuper member and not necessarily AustralianSuper. The AustralianSuper member made their comments based on their particular circumstances and experience. You should assess your own financial situation and consider obtaining financial advice before making an investment decision For more information on receiving your super as an income stream, please visit the AustralianSuper website.
1 Super Reality Check, ASFA, August 2015