Retiring doesn’t mean you need to immediately withdraw your superannuation. In fact, leaving your money in super after retirement can be a smart financial strategy depending on your circumstances. Many Australians wonder if keeping their retirement savings in the superannuation system is allowed or beneficial. The short answer is yes – you absolutely can leave your money in super after you retire, and there might be good reasons to do so.
Understanding Your Options for Super After Retirement
When you retire, you have several options for your superannuation:
- Leave it in accumulation phase
- Convert to an account-based pension
- Withdraw a lump sum
- Use a combination of these approaches
Let’s explore these options in more detail, so you can make an informed decision about what works best for your retirement plans.
Leaving Super in Accumulation Phase
If you leave your super in accumulation phase after retirement, your money continues to be invested and will (ideally) grow over time. This is a completely valid option that many retirees choose.
As Chris Strano from Super Guy explains, “Once you retire, you are not obligated to withdraw your super or commence an income stream You can simply retain your super in an accumulation account.”
Benefits of Keeping Super in Accumulation Phase
- Continued investment growth: Your money remains invested and can continue to grow
- No withdrawal requirements: Unlike pension accounts, there are no minimum withdrawal requirements
- Flexibility for ad-hoc withdrawals: You can still make withdrawals when needed if you’ve met a condition of release
- Tax-free withdrawals: If you’re over 60, lump sum withdrawals are generally tax-free
Common Reasons for Leaving Money in Accumulation Phase
There are several situations where keeping your super in accumulation phase makes sense
- You have adequate income from other sources and don’t need super for living expenses
- Your super balance exceeds the Transfer Balance Cap (currently $1.7M)
- You’re still working or planning to return to work and want to continue making contributions
- You have life insurance policies within super that you want to maintain
Tax Implications of Accumulation vs Pension Phase
One significant consideration when deciding what to do with your super is the tax treatment:
Accumulation Phase:
- Investment earnings taxed at 15%
- Capital gains on assets held longer than 12 months effectively taxed at 10%
- Concessional contributions taxed at 15%
Pension Phase:
- Investment earnings are tax-free (0%)
- Withdrawals after age 60 are generally tax-free
This tax difference is one of the major disadvantages of leaving super in accumulation phase rather than converting to a pension
Starting an Account-Based Pension
An account-based pension (also called an allocated pension) is a popular option for retirees. It provides regular income payments while keeping your money invested.
As Barry’s example from MoneySmart shows, many retirees contact their super fund a few months before retirement to arrange for an account-based pension to start as soon as they stop working. This ensures a smooth transition from employment income to retirement income.
Benefits of Account-Based Pensions
- Tax-free earnings on investments within the pension account
- Regular income stream to replace employment income
- Flexibility to adjust payment amounts (above minimum requirements)
- Tax-free withdrawals for those over 60
Can I Access My Super After Retirement?
To access your super, you generally need to:
- Reach your preservation age (between 55-60 depending on birth date) AND be permanently retired, OR
- Reach age 65 (regardless of work status)
As MoneySmart explains, “Accessing super is not automatic. Usually, you have to be a certain age and no longer work. “.
Once you’ve met a condition of release, you have complete flexibility in how you access your super – whether leaving it invested, taking lump sums, or starting a pension.
What Happens to Super on Day One of Retirement?
When you retire:
- Your employer stops making contributions to your super
- Any salary sacrifice arrangements end
- Your super remains invested until you decide what to do with it
The ball is completely in your court. Your super fund will continue managing your money until you give them instructions otherwise.
Considerations Before Deciding What to Do With Your Super
Before making decisions about your retirement savings, consider:
- Your overall retirement income strategy: How does super fit with other income sources?
- Tax implications: Would pension phase tax benefits outweigh other considerations?
- Investment fees: Are you getting value from your super fund’s fees?
- Access needs: How frequently might you need to access your money?
- Centrelink implications: How will your choice affect any government benefits?
- Insurance coverage: Do you have insurance through super that might be affected?
Frequently Asked Questions About Super in Retirement
Can I contribute to super after I retire?
Yes, you can still make contributions to super after retirement, though there are age-based restrictions and contribution caps. You can’t contribute directly to an existing account-based pension, but you can add to an accumulation account.
What happens to my super when I die?
Your super will be paid to your chosen beneficiaries or your estate when you die. It’s important to keep your super fund’s beneficiary designations up to date.
Will my insurance continue if I leave money in super?
You can keep your insurance policies in super as long as you have enough money to pay the premiums. But some policies may end when you reach a certain age or when you retire, so check with your fund.
Is super in accumulation phase deemed for Centrelink purposes?
If you are under the age of 65 and your super is still in the accumulation phase, Centrelink will not count it toward your income. If you are old enough to get the Age Pension, your accumulation account balance is used to figure out if you meet the Centrelink Income Test and the Assets Test.
Making Your Decision: Steps to Take
- Review your financial situation: Assess your income needs, other assets, and tax position
- Speak with your super fund: Understand all options specific to your fund
- Consider seeking financial advice: A financial advisor can help optimize your retirement strategy
- Make a retirement income plan: Determine how super fits into your overall income strategy
- Review regularly: Your needs and circumstances may change throughout retirement
The Bottom Line: It’s Your Choice
Ultimately, there’s no one-size-fits-all answer to whether you should leave your money in super after retirement. The right choice depends on your personal circumstances, financial goals, and retirement lifestyle.
What’s important is knowing that you have options. You can leave your super in accumulation phase, convert it to a pension, withdraw it partially or completely, or use a combination of these approaches.
As Bella Mertz from The Money Know How puts it, “After years of working, you’d like to think that your blood, sweat and tears has finally paid off and you can now look forward to enjoying the little nest egg you’ve built to retire on. But even though you may have overcome one obstacle, you may now face another – what to do with all your retirement savings?”
The good news is that you have flexibility and control over how you use your super in retirement. Take time to understand your options and make decisions that support your retirement goals and lifestyle.
How a Retirement Income account works
A Retirement Income account is how you pay yourself a regular income from your super. [M5] Here’s how it works:
- You put some or all of your retirement savings into a Retirement Income account that you open. You should know that there is a limit to how much you can transfer. The government sets the general lifetime limit at $2 million.
- Pick the amount you want for each “pay day” and how often you want to get paid.
- You can pick an investment option for your money, or you can use the conservative balanced option that our retirement investment experts came up with as a default.
- You can change how often and how much you pay at any time. You can also get large amounts of money when you need them.
- Enjoy your income payments until your super balance runs out.
Like all financial decisions, it’s important to understand the pros and cons of starting a Retirement Income account.
Sources of income in retirement
Most people need to make sure theyll continue having an income in retirement – a bit like a payday, but without needing to show up to work. The main ways retired Australians access an income in retirement are through their super and the Government Age Pension.
Some people also have personal savings and investments they can lean on to fund their retirement. And, of course, if you continue some form of employment during retirement, you’ll also have that wage.