Lump sum withdrawals If you're aged 60 or over and withdraw a lump sum: You don't pay any tax when you withdraw from a taxed super fund. You may pay tax if you withdraw from an untaxed super fund, such as a public sector fund.
Whether the money in your super account is tax-free or taxable when you withdraw it generally depends on the type of contributions made and whether tax was paid on it. Non-concessional (after-tax) contributions – those made from income after you paid tax on it – are tax-free when withdrawn from your super account.
You can withdraw your super: when you turn 65 (even if you haven't retired) when you reach preservation age and retire, or. under the transition to retirement rules, while continuing to work.
If your super provider allows it, you may be able to withdraw some or all of your super in a single payment. This payment is called a lump sum. You may be able to withdraw your super in several lump sums. However, if you ask your provider to make regular payments from your super it may be an income stream.
In most cases, the lump-sum option is clearly the way to go. The main difference between a lump-sum and a monthly payment is that with a lump-sum option, you get to have control over how your money is invested and what happens to it once you're gone. If that's the case, then the lump-sum option is your best bet.
Assume, for example, you will need 65 per cent of your pre-retirement income, so if you earn $50,000 now, you might need $32,500 in retirement.
Starting an income stream (super pension or annuity)
Investment earnings in super income streams are tax free, except in a transition-to-retirement pension where earnings are taxed at 15% until you retire or reach age 65. Read more about your super options on retirement.
Currently, the maximum amount that most savers can claim as a pension commencement lump sum is 25 per cent of their available lifetime allowance at the time this sum is taken.
Tax on Super Withdrawals Over 60
In most cases, you will be able to withdraw your super tax free as either a lump sum, or income stream if you are over 60 – whether your super is in accumulation phase or pension phase.
Maximum limits
A maximum withdrawal limit of 10% applies to a Transition to Retirement (TTR) Income Stream. Maximum payment limits do not apply from a Retirement Income Stream.
This obviously depends on what annual income you want to fund but if you want to be able to afford a comfortable retirement—which is an income of just over $48,000 a year for a single according to the ASFA Retirement Standard—then you need a balance of at least $500,000.
If you want a lump sum superannuation withdrawal at age 60, you will need to retire fully. You'll also need to submit a declaration to your super fund that you are retiring permanently, with no intention of returning to gainful employment - either part-time or full-time.
You can fully access your superannuation once you reach age 65 even if you are still working. If you have reached your preservation age and permanently retire (i.e. do not intend to work again for more than 10 hours in any week) you will meet a condition of release.
If you're 60 and over, the income will generally be tax-free. If you're between your preservation age and 59, the components of your super will dictate how it will be taxed.
From 6 April 2023, the amount of tax-free lump sum you can take is 25% of your pension pot, up to a maximum of 25% of the standard lifetime allowance.
If the full 25% lump sum is part of your financial-planning arrangements as you move into retirement, you'll need to take it, or change your plans. However, if you can afford to do without the full lump sum in one go, instalments have real advantages.
While the main aim of a pension is to give you an income throughout your retirement, you have the flexibility to take out lump sums whenever you want from the age of 55 – and, in most cases, up to 25% of the total value of your pension can be withdrawn tax free.
Super is a great way to save money for your retirement. It is generally taxed at a lower rate than your regular income. You typically pay 15% tax on your super contributions, and your withdrawals are tax-free if you're 60 or older. The investment earnings on your super are also only taxed at 15%.
How much super you'll need in retirement depends on the lifestyle you want. According to the government's MoneySmart website, if you own your home, the rule of thumb is that you'll need two-thirds (67%) of your current income each year to maintain the same standard of living.
If you are over age 65, there is no restriction on how much super you can access, even if you are still working. Reaching age 65 is classified as a full superannuation condition of release, meaning you have full access to your super, which can be withdrawn as a lump sum or income stream.
The quick answer is “yes”! With some planning, you can retire at 60 with $500k. Remember, however, that your lifestyle will significantly affect how long your savings will last.
Therefore, $250,000 will last about two years and eight months before running out.
So looking at the table, you can see that a 60-year old male will need a lump sum of almost $500,000 to provide an annual income in retirement of $42,000 for 20 years. These calculations are based on a 20-year time frame because the approximate life expectancy for Australian males is 84 years and 88 for females.
That means the monthly amount may be a better deal in the long-term. As a rule of thumb, it's more realistic to expect your lump sum to earn less than 6% per year in investments. If you can earn less than 6% and still make more than your pension plan payments, the lump sum payout may be your best bet.