How Do You Actually Spend Your Super? Here’s All You Need to Know

Transitioning from the accumulation phase of superannuation to the retirement phase can seem daunting, but understanding the process can help you effectively manage and enjoy your retirement savings. Here’s a comprehensive guide to spending your superannuation in retirement.

Opening a Retirement Phase Account

When you retire and are ready to start using your retirement savings, you need to shift your superannuation from an accumulation phase account to a retirement phase account. This allows you to start drawing down your superannuation.

Most people stay with their existing superannuation fund, but you can also switch to a fund that better suits your retirement needs. Some funds offer a retirement bonus for staying or switching, which can be a lump sum payment based on specific criteria.

Choosing Your Retirement Phase Account

The most common vehicle for accessing superannuation in retirement is an account-based pension, which turns your super into a regular income stream. You can transfer up to $1.9 million into the retirement phase. This is called the Transfer Balance Cap. Any earnings generated from investments within your retirement phase account are tax-free.

Key Principles of the Retirement Phase

  1. Tax-Free Income and Growth: Within your retirement phase account, any income and capital growth are tax-free up to a balance of $3 million per person.
  2. Compulsory Drawdown Levels: To ensure you use your superannuation to fund your retirement, there are minimum drawdown requirements based on your age.
  3. Interaction with the Age Pension: As your superannuation balance decreases, you may become eligible for a part or full age pension, providing a safety net in retirement.

Drawing Down: How Much Do You Need?

The government sets minimum annual drawdown rates based on age. For 2024, the rates are:

  • Under 65: 4%
  • 65-74: 5%
  • 75-79: 6%
  • 80-84: 7%
  • 85-89: 9%
  • 90-94: 11%
  • 95 and over: 14%

These percentages are applied to your account balance at the start of each financial year.

Balancing Drawdowns with Sustainability

Consider the following to determine your suitable drawdown amount:

  • Life Expectancy: Plan for a longer lifespan than average estimates.
  • Spending Needs: Consider your active retirement years versus passive retirement years.
  • Health and Care Costs: Budget for potential health and aged care needs.
  • Investment Risk Profile: Assess your risk tolerance and investment returns over retirement.

Drawing a Lump Sum vs. Taking a Regular Income Stream

While tempting, drawing a lump sum can reduce your ongoing income, limit future investment growth, and increase the risk of mismanaging funds. On the other hand, an account-based pension offers:

  • Tax Efficiency: Regular income payments from the retirement phase account are tax-free.
  • Sustainable Cash Flow: Designed to provide a steady income stream over a long period.
  • Continued Investment Growth: Funds stay invested, generating income and growth.

Supplementing Superannuation with the Age Pension

As your super balance decreases, you may become eligible for the age pension, which provides additional income. The age pension and superannuation can work together to afford a modest retirement. Also, consider benefits like the Pensioner Concession Card and the Commonwealth Seniors Health Card for discounts on healthcare and medicines.

Navigating the Transition

Understanding the rules and systems of the retirement phase helps you manage your income and enjoy your retirement savings. Seeking professional advice tailored to your personal circumstances is recommended for making informed financial decisions.

Navigating into the retirement phase can initially seem complex, but once set up, managing your retirement income will become a new normal, allowing you to enjoy the fruits of your hard-earned savings.

Ready to make the most of your retirement savings? Contact BOA & Co. at 1300 952 286 or email us at to help you navigate the transition and optimize your retirement income. Visit our website at for more information.

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