Superannuation plays a central role in retirement planning for many Australians. After years of contributions, retirement is the moment when you finally get to use the money you’ve worked hard to save. Whether you’re approaching retirement soon or still have a while to go, it’s worth understanding what happens to your super and the choices you’ll need to make.
When can you access your super?
Most people can access their super once they reach their preservation age (currently 60) and retire. Alternatively, once you turn 65, you can access your savings even if you’re still working.
There are limited cases where early access may be allowed, such as severe financial hardship or permanent disability. However, for the majority, retirement is the key milestone that unlocks superannuation savings.
Your options in retirement
Once you meet a condition of release, your super becomes available. That doesn’t mean you have to take it all out at once—several options are available, and you can even combine them.
1. Leave it invested
You can keep your super in the accumulation phase, where it continues to earn returns (taxed at 15%). This can be useful if you don’t need the money immediately, though it may not be as tax-efficient as other choices.
2. Take a lump sum
Some retirees choose to withdraw part or all of their super as a lump sum. This may be used to pay off debt, cover medical costs, or invest elsewhere. The downside is that withdrawing large amounts can shorten the life of your savings and may affect your tax situation or Age Pension entitlements.
3. Start an income stream (account-based pension)
This option converts your super into regular payments, providing a steady income. You choose the frequency and amount (subject to minimum requirements), and earnings in the pension phase are tax-free. It also allows flexibility to withdraw lump sums if needed. However, payments gradually reduce your balance over time.
4. Consider a lifetime annuity
For those concerned about outliving their savings, a lifetime annuity can provide income for life. You invest part of your super into the product, and in return, you receive guaranteed payments no matter how long you live. Many people use a mix of an annuity and a pension—combining flexibility with security.
Mixing your options
You don’t have to pick just one path. A common approach is to:
- Leave some funds invested,
- Take a lump sum to clear debts,
- Use part of your super for a pension, and
- Allocate some to a lifetime annuity.
The right blend will depend on your financial needs, lifestyle, health, and whether you’re eligible for the Age Pension.
The Age Pension and your super
From age 67, you may qualify for the Age Pension, which provides additional income and concessions such as reduced healthcare or utility bills. Eligibility is based on income and assets, which includes your super. However, the way your super is assessed can change if it’s converted into an income stream, such as a pension or annuity.
The Age Pension often works best as a safety net, supplementing your super to help it last longer.
Tax and super in retirement
Tax treatment depends on how you use your super. Earnings are taxed at up to 15% in accumulation phase but are tax-free in pension phase. If you’re over 60 and permanently retired, withdrawals (either lump sum or income) are usually tax-free. Different rules can apply if you’re younger or receiving specific types of benefits, so personal advice is valuable.
Making your super last
Australians are living longer, which makes retirement planning even more important. Strategies to consider include:
- Budgeting carefully so you don’t overspend,
- Keeping some savings invested,
- Combining multiple income sources (super, annuities, Age Pension), and
- Regularly reviewing your investments to ensure they match your goals and risk tolerance.
What happens to your super when you pass away?
Any remaining balance in your super is usually paid to your beneficiaries or estate. This is known as a death benefit and can be distributed as a lump sum or, in some cases, an income stream. The tax treatment depends on who receives it—for instance, a lump sum paid to a spouse is tax-free.
To make sure your wishes are respected, it’s important to nominate your beneficiaries with your super fund. A binding nomination ensures your money goes exactly where you intend.
Planning for peace of mind
Superannuation is one of the most effective ways to fund retirement, but reaching retirement age doesn’t mean the decision-making stops. Choosing how to use your super can affect your lifestyle for decades.
Whether you opt for lump sums, regular payments, or a mix of strategies, thoughtful planning helps ensure your money lasts. A financial adviser can guide you through your options, helping align your super with your personal goals.
With the right approach, your super can provide security, flexibility, and confidence for the years ahead.
