Managing your retirement income
Your retirement income can come from more than just your super savings. These other sources, if you have them, may determine how you choose to withdraw and manage your super over the course of your retirement.
How you manage your income will depend on:
- Whether you're likely to return work
- What other assets you have outside super such as access to the Age Pension
- Your retirement goals
Different income sources
You may have access to a range of income sources in retirement, such as:
- The government Age Pension
- Personal savings and investments outside your super
- Any salary you receive if you choose to work in retirement
- Your super savings
- Home equity release or selling the family home
How your super fits in with other sources including the Age Pension
Considering your different sources of retirement income can help you manage or adjust your plan when retired.
It’s important to note that your eligibility for the Age Pension and the amount you receive will depend on your other assets and income, including your super.
The way you access your super could also impact the amount of tax you pay and your Age Pension entitlement.
The rules are designed to encourage people to take their super money over time, rather than as a lump sum. However, you do have options for how you take your super in retirement, including all at once or via a regular income stream.
It’s important to remember that the Age Pension is designed to provide a ‘safety net’ if you don’t have enough super or other financial resources to provide an adequate retirement income.
What can you do with your super in retirement?
Once you’re retired and met the other conditions to access your super money, you can choose what you want to do with your super.
What you do will depend on your goals, situation and other assets – and you have the flexibility to access your super in any, or all, of the ways available to you (if you’re eligible) as part of a changing plan during retirement.
How tax applies in retirement
Tax generally won't apply on payments from your Retirement Income (RI) pension account once you turn 60 and over. However, depending on your age and the type of account you have, there are cases where tax applies. You may also pay tax on lump-sum withdrawals.
Tax on retirement income pension payments
When you receive payments from your allocated pension account, your age and the type of account determines whether it’s tax-free.
- Investment earnings in your pension account are tax exempt
- If you’re 60 or over, your regular income payments and lump-sum payments from your pension are tax free
Different parts of your pension are taxed differently
Your RI Allocated Pension account may include two different parts or ‘components’. Each part is taxed differently, depending on where the funds come from.
How tax applies to your regular income and lump-sum payments
The two tables below provide a summary of how tax applies to your regular income payments and any lump-sum payments from your RI Allocated Pension.
The taxable part of your super benefit that was transferred to your pension account. You may pay tax on this part of your pension when you access it. For example, it would include employer and salary sacrifice contributions.
To find out more about the tax components of your pension account, please call your Member Services Centre on 13 43 72.
| Age | Lump-sum payments tax withheld rate (including 2% Medicare Levy) | Income stream payments tax withheld rate (plus 2% Medicare Levy) |
|---|---|---|
22% | Taxed at your marginal tax rate, with no tax offset1 | |
60+ | Nil | Nil |
The tax-free part of your super benefit that was transferred to your pension account. You do not pay tax on this amount. For example, it would include personal contributions made to your super, that you didn’t claim as a tax deduction.
If you transferred from West State Super or Gold State Super, it would also include any part of your benefit that was taxed at 47% because your balance was above the untaxed plan cap.
| Age | Lump-sum payments tax withheld rate (including 2% Medicare Levy) | Income stream payments tax withheld rate (plus 2% Medicare Levy) |
|---|---|---|
Under Commonwealth preservation age | Nil | Nil |
60+ | Nil | Nil |
Examples of how regular income payments are taxed
If your pension account has a tax-free and a taxable component, your regular income payments will include an amount drawn from each component, based on the total value of your pension.
Here are two examples of how income payments are taxed according to your age and the components of your account.
- Fiona is 63 and transfers $250,000 to an RI Allocated Pension
- Her $250,000 is made up of a $210,000 taxable component and a $40,000 tax-free component
- She chooses monthly income payments of $1,600
Her monthly pension will include the following components:
40,000/250,000 x 1,600 = tax-free: $256
210,000/250,000 x 1,600 = taxable-taxed: $1,344
Tax-free + taxable-taxed = $1,600
- Fiona is over 60, so the total amount of her pension payment will be tax free.
- Frank is 57 and transfers $350,000 to an RI Allocated Pension
- His $350,000 is made up of a $310,000 taxable component and a $40,000 tax-free component
- He chooses monthly income payments of $1,400
His monthly pension will include the following components:
40,000/350,000 x 1,400 = tax-free: $160
310,000/350,000 x 1,400 = taxable-taxed: $1,240
Tax-free + taxable-taxed = $1,400
Frank is 57, so he will need to pay tax on the taxable-taxed component at his marginal tax rate (plus Medicare Levy of 2%). A 15% tax offset on the taxable component is available to reduce the amount of tax he needs to pay. He will not pay tax on the tax-free component.
Managing your money in retirement
Managing your money is about making sure it lasts throughout your retirement and affords you the financial freedom to do the things you enjoy.
Super is only one piece of the retirement income puzzle, so it can help to plan and manage your money holistically.
Create a budget
Setting a budget for yourself will help you to track your spending, stay on top of your bills and work out how to afford the things you want.
MoneySmart has put together simple steps to help you prepare and use a budget.
Review your investments
Investing in retirementRetirement isn't an all or nothing event, so as your plans change, it's a good idea to review your investment plan(s).
You can change your plan at any time, switch money between multiple plans and rebalance assets to suit your goals.
Plan ahead
Changing circumstancesYou might face changes that you have no control over, such as global economic conditions.
While you can't be certain of what the future will hold, you can make sure you have a flexible plan in place that can help you manage unexpected events.
More information
Need help
- Call us on 13 43 72
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