Although the advised period of retirement is 65 years old, still many people older than 65 continue to be working – either full-time or part-time. Simultaneously, there are many people under 65 who want to transition to retirement early, given that they have saved enough in their retirement fund.
Now you ask ,, how do we best get ready for this transition to retirement? Is it possible to access our superannuation savings even though we are still working? What are the steps that we may take to be able to continue working and still access our superannuation benefits?
To be able to answer these questions, we should first understand transition to retirement. Transition to retirement is a program which allows people who have reached their retirement age, to keep working and at the same time reap the advantages of their superannuation fund. For them to access their benefits they have to draft their non-commutable superannuation income streams. This is known as transition to retirement streams.
There are rules to adhere to regarding your transition to retirement. These are as follows:
• You are permitted to shorten your working hours yet maintain your income. You can do this by adding together your income from your part-time job with your income stream from the benefits from your superannuation fund.
• In transition to retirement, you may either withdraw money out of your super fund in a lump sum, or through a steady stream of revenue.
Taxes still affect your retirement income streams when you are under 60 years of age. The typical tax rate is 15 percent. Your income from your part-time job will also be taxed at the marginal tax rate. Once you are 60 years or older, no tax is going to be charged for your superannuation income stream.
Not every super fund services offer a non-commutable income stream. The reason being it’s optional for superannuation funds to provide this to their members. However, if you are convinced that transition to retirement is the best option for you, you can move your super fund from one service to another. Many people also choose to manage their super fund themselves. This is known as self-managed super fund (or SMSF). However, you might need a professional smsf auditor to assist you in accomplishing this step.
Before deciding if transition to retirement will be good for you and your circumstance, it’s advisable for you to talk to a professional. Experts are knowledgeable and therefore are aware of the ever-changing rules and regulations that apply to transition to retirement and Australian superannuation rules. You may decide to inquire from financial planners, lawyers, auditors, or accountants specializing in superannuation.
Please note that every numbers in this article were accurate during the time of writing but may have changed in the meantime and must be verified, preferably with an independent smsf auditing firm or the like.