If you’re getting ready to leave work soon, now is the time to look into different ways to fund your retirement.
One of the many great things about reaching this stage of life is finally being able to access your super savings.
But reaching your preservation age doesn’t necessarily mean you’re ready to retire.
Before you take the leap and leave work to cash in on your super, it’s important to have a clear plan for how you’re going to fund your life after work for the long term.
A single person is predicted to need about $43,538 per year to lead a comfortable retirement, according to the Association of Superannuation Funds of Australia (December quarter 2016). That’s around $840 a week.
Your exact needs will depend on your existing financial commitments, health, lifestyle, and the sorts of things you want to do with your time after work.
Start by thinking about how much you’ll need to cover both your weekly spend and larger expenses such as holidays, birthdays and special occasions.
What you need in retirement won’t be too different to what you’re already spending, so if you’ve never set a budget before, consider tracking where your money goes for a few weeks to get an idea of what your outgoings really look like.
Transitioning to retirement
As you approach retirement, it’s worthwhile thinking about what you want to do with your super.
When you reach your preservation age (between 56 and 60 years old) and are still working, you may be able to start a transition to retirement income stream that gives you access to your existing super before you are permanently retired.
With a transition to retirement income stream you can continue to work and add to your super account, while also withdrawing super from a separate income stream account.
A transition to retirement income stream could enable you to:
- use additional income from your super to pay off debts while you're still working
- boost your super before-tax with salary sacrificing while also withdrawing super through your income stream
- reduce your working hours as you approach retirement while topping up your income with payments from super.
Leaving work full time
Once you’ve reached your preservation age, you can always mix and match your options to suit your needs.
If you plan to celebrate your milestone with a big expense such as an overseas trip, you can withdraw some of your money as a lump sum, less applicable fees and taxes, and keep investing the rest of it through super.
Also think about the government age pension. You may be able to supplement your retirement income with government support to help your super go the distance for the long term.