Grow your super in retirement

19 July 2024

You've worked and saved hard to build a super nest egg for your retirement. Now that you’re starting to think about the next stage of your life, it’s important to consider how you want to manage your money. You could be retired for more than 20 years, so choosing an option which could help grow your savings is something to consider.

Planning your retirement means taking stock of your super and deciding how to manage your finances. Super can play a key part in financing your retirement years. If you’re eligible, the Government Age Pension is also a factor to consider when reviewing your retirement income.

There are several options for managing your retirement savings. These are outlined in more detail below.

READ MORE: AM I ELIGIBLE FOR THE GOVERNMENT AGE PENSION?

When you can access your super

You can access your super when you reach 60 years of age and retire. The meaning of ‘retire’ depends on your age and how and when you finished work:

• If you’re 60-64:
• You stopped working permanently, or
• You stopped working for any employer after you turned 60
• If you’re 65 or older:  you can access all your super, even if you’re still working.

When you can access the Government Age Pension

If you’re eligible, you can access the Government Age Pension when you reach Qualifying Age. For most people retiring now, Qualifying Age is 67.

Find out more: Age Pension age requirements

5 options to consider to help manage your super in retirement

There are several options when it comes to managing your super in retirement. Below are some of the most commonly chosen ones.

Option 1: Leave your money in your super account until you need it

Many people start using their super savings as soon as they retire and can access them, but you don’t have to. If you have other income sources or savings to live on, you could leave your super savings in your super account. This means your money stays invested and you could continue to benefit from investment returns.

Option 2: Take your balance as a lump sum

You may choose to withdraw your super and put it into a bank account. Once that’s done you could manage your money in several ways, including those outlined below.

It’s worth considering that once you have withdrawn your super as a lump sum you might not be able to put it back into a super or retirement account later (for example, an account based pension). This will depend on your age and the government contribution caps.

Use a savings account

If you have your money in a bank account, you may decide to put some of it into a savings account. It’s important to remember that interest rates on savings accounts can change. The rising cost of living is also something to keep in mind with this option. Consider your living costs, inflation, and interest rates.

Invest your money outside super

You could choose to invest your money yourself. Personal investing success can depend on the market conditions and your risk appetite. Returns fluctuate and you can lose money. It also requires a high level of knowledge and expertise – and often time. It’s worth considering that with this option, you won’t benefit from the concessional tax rates on earnings that apply to investing in super.

Managing your own investments can give some people a new focus once they finish up at work. But for others, it can add pressure and get in the way of properly enjoying their retirement. Consider speaking to a financial adviser to help decide whether this option is right for you.

Option 3: Set up an SMSF (Self-Managed Super Fund)

Established by an individual, couple or family, SMSFs are a means of looking after your own super savings, and potentially those of other family members as well. Much like having an account based pension with your super fund, you can make provisions to draw an income from your SMSF after you retire.

With an SMSF, you can choose your own investments and are responsible for complying with superannuation and tax law. All members of the SMSF must be trustees or directors of the corporate trustee.

The option to manage your own superannuation can be appealing. But it involves a lot of work and can come with some risk. While you may decide to outsource its daily administration, the SMSF is ultimately your responsibility. Professional financial, legal and taxation advice and support is therefore highly recommended.

READ MORE: SMSF OR DIRECT INVESTMENT OPTION?

Option 4: Start a transition to retirement (TTR) strategy

Making a transition to retirement – rather than completely stopping work – gives you the flexibility to get ready for retirement based on your needs.

An AustralianSuper TTR Income account helps if you want to work fewer hours by balancing out your reduced salary with payments from your super. Or, you can use a TTR income account to reduce the amount of tax you pay on additional contributions to your super¹.

READ MORE: TRANSITION TO RETIREMENT YOUR WAY

Option 5: Open an account based pension

An account based pension, like AustralianSuper’s Choice Income, keeps you in control of your super balance in retirement. You can take your super as a regular income payment – just like when you were working.

This option keeps your money invested with your super fund. With Choice Income, the AustralianSuper investment team invests your super, with the aim of delivering you strong, long-term returns.

Even in retirement a long-term focus for your investments is important. In most cases, making successful investment decisions requires financial expertise and a solid understanding of how to manage risk.

The difference an account based pension could make 

Let’s look at the example of Sunil and Pia. Both are aged 65 and have a super balance of $75,000 when they retire.

• Sunil works as an IT services manager, and when he retires he puts his super balance into a savings account. He budgets well and makes sure he’s careful about how much he withdraws each fortnight.
• Pia works as a nurse and opens a Choice Income account with AustralianSuper when she retires. She likes the benefit of keeping her super invested and knows she has the flexibility to withdraw extra money anytime she wants.

Now, let’s consider the potential impact of Choice Income. Sunil’s and Pia’s fortnightly income payments and Government Age Pension payments are the same. But because Sunil’s money has been put into a savings account – instead of staying invested with Choice Income – his balance runs out 7 years before Pia's.

How an account based pension can help your super can go the distance

The above comparison highlights how important it is to decide what to do with your super when you finish working, and how it can shape your retirement.

Calculate how long your super could last

How long your super savings will last largely depends on your lifestyle. We all live a little differently and have different retirement dreams. Whatever you’re planning, it can be good to get an idea of how long your savings will last.

AustralianSuper’s Super Projection Calculator can give some insight. You can work out whether you’ll have enough income for your retirement needs and estimate how long your super could last.

Making a holistic plan for your retirement

Looking at how you might boost your savings is just one aspect to consider as you plan for and build your confidence in taking this next step. Others include when you wish to retire and how gradually. You also need to decide what kind of lifestyle you want, taking into account, for example, any travel plans you may have, as well as financing your hobbies and interests.

6 tips to start planning your retirement