Turning 60? Here’s what happens to your super
Turning 60 is a big milestone for your superannuation.
For many Australians, it’s the age when super becomes much more flexible from a tax perspective. You may be able to access your super tax-free, start drawing an income from it, or begin planning a transition from work to retirement.
But there’s a bit more to it than simply blowing out 60 candles and cashing in your super.
Your ability to access your money depends on the super rules that apply to you, while the tax treatment depends on the type of benefit you receive and the fund it comes from.
Here’s what you need to know before making any big decisions.
Is super tax-free when you turn 60?
For most Australians, super benefits paid from a taxed super fund are tax-free once you turn 60.
This generally applies to lump sum withdrawals and income payments from a super pension, provided the relevant conditions are met.
That can make a significant difference when you start using your super to fund your lifestyle.
For example, if you retire and receive income from a typical account-based pension funded with taxed super, those payments will generally be tax-free once you’re 60 or older.
There are exceptions. Some public sector and defined benefit schemes include an untaxed component, which can still be taxable. Your circumstances and the type of super benefit matter. Moneysmart explains how retirement income and different super fund types are taxed.
TIP: Don’t assume every payment from every super fund will automatically be tax-free. Check your fund, your benefit type and the rules that apply to you before making decisions.
Can you access your super as soon as you turn 60?
Not necessarily.
Turning 60 and being eligible to access your super are two different things.
You generally need to meet a condition of release before you can withdraw your super. Depending on your circumstances, this might include retiring after reaching preservation age, ending an employment arrangement after turning 60, or reaching age 65.
If you’re still working, there may be other options to explore, including a transition-to-retirement income stream. These arrangements have specific rules and may not suit everyone.
The important point is that turning 60 doesn’t automatically give you unrestricted access to your entire super balance.
TIP: Before planning to use your super to pay off a mortgage, fund travel or reduce your working hours, check whether you can access it and how much you can withdraw.
What if you’re still working at 60?
You don’t have to retire just because you’ve turned 60.
You might want to keep working full-time, reduce your hours, move into a different role or start preparing for retirement over the next few years.
Depending on your circumstances, you may be able to access some of your super through a transition-to-retirement income stream while continuing to work. However, these arrangements have restrictions, and the tax treatment of investment earnings can differ from that of a retirement-phase pension.
It’s worth looking at your income, super contributions, living costs and retirement goals together rather than treating them as separate decisions.
TIP: If you’re planning to reduce your hours, run the numbers first. Work out how much income you need, what you’ll receive from employment and whether drawing on super makes sense for your longer-term plans.
Three things to check before you turn 60
You don’t need to wait until your birthday to get your super organised. In fact, starting a few years earlier gives you more time to make changes.
1. Check your super balance and investments
Know how much you have, where it’s invested and what fees you’re paying.
Your investment strategy should reflect your circumstances, goals and timeframe. That doesn’t mean moving everything into cash as retirement approaches. It means understanding the risks you’re taking and whether your investments are appropriate for your plans.
2. Understand your retirement income
Think about how much money you’ll need to cover your living costs, including housing, food, bills, travel and the things you enjoy.
Consider other income sources, such as employment income, investments and any eligible government benefits. Your super balance is only one part of the picture.
3. Review your contribution strategy
If you’re still working, super contributions may continue to play an important role in your retirement plan.
Check your employer contributions, any voluntary contributions you make and the contribution caps that apply to you. Rules around contributions and withdrawals can be complex, so get help if you’re unsure.
TIP: Put a reminder in your calendar to review your super at least once a year, and whenever your circumstances change significantly.
Don’t forget the bigger picture
Tax is important, but it shouldn’t be the only reason you make a decision about super.
Withdrawing money because it’s tax-free doesn’t automatically make it the right move. You’ll also need to think about what happens to the money afterwards, how it affects your future income and whether it changes your overall retirement strategy.
For some people, keeping money invested in super may make sense. Others may need to draw on it to fund retirement or meet other goals. There isn’t one answer that works for everyone.
The goal is to understand your options before making a decision.
Check your super with Rask
Not sure where your super stands?
Start with the basics. Check your balance, fees, investments, insurance and beneficiaries, and make sure your details are up to date.
The Rask Super Checker lets you explore an indicative projection using your current balance and assumptions. Check your fund directly for details such as fees, insurance and beneficiaries.
If you’re approaching 60 and want to understand how super fits into your broader financial situation, Rask Financial Advice can help you explore your options and develop a strategy that suits your circumstances.
Explore Rask Financial Advice.
Turning 60 can open up new options, but the best approach is to understand the rules, plan ahead and make decisions based on the life you want to live.
This article contains general financial information only and does not take into account your objectives, financial situation or needs. Consider your own circumstances and seek personal advice before acting on anything discussed.
