This guide explains general concepts for educational purposes. It is not financial, tax or legal advice, or a recommendation to buy, sell, hold or change a financial product or strategy. It does not take into account your objectives, financial situation or needs. Rules, caps, thresholds and product terms can change. Check the current official information and obtain advice appropriate to your circumstances before making a financial decision.
Match the payment to the purpose
Once you can access super, you do not necessarily have to choose between withdrawing everything and keeping everything in a pension. Different amounts can serve different needs. A planned home repair may call for a one-off payment; ongoing household spending needs a continuing income arrangement.
Start with a list of expenses and their timing. That helps establish which money should remain invested, which should be readily available and how much needs to reach your bank account regularly.
Understand an account-based pension
An account-based pension pays regular income from money that generally remains invested within super. You choose an available payment arrangement within the applicable rules, including annual minimum requirements. Investment performance, fees and withdrawals affect the remaining balance.
A pension is not automatically an income guaranteed for life. Check the investment settings, ability to make additional withdrawals and beneficiary arrangements. The payment schedule should suit your spending, while the underlying investments should suit the timeframe and risks you can accept.
Plan what happens to a lump sum
A lump sum may repay debt, cover a major purchase or establish money outside super. Each use changes the remaining retirement resources. An amount sitting in a bank account can also receive different tax and Centrelink treatment from the same money in a particular super arrangement.
Access eligibility does not establish whether a withdrawal is suitable. Returning withdrawn money to super later may involve contribution eligibility and caps. Compare the complete result, including future income, access, tax and any effect on benefits, before transferring a substantial amount.
Compare a combination against your budget
A practical retirement plan can combine regular pension payments with a reserve and planned lump sums. It can also consider other retirement income products where appropriate. There is no universal percentage that should be allocated to each component.
Ask the fund how payments will be classified, particularly where a commutation and a pension payment have different consequences. Coordinate commencement dates, bank details and the first year’s cash needs so the arrangement works operationally as well as in a projection.