Robert's Retirement Blog

The Association of Superannuation Funds of Australia (ASFA) has published (reflective as at June 2024) that to have a comfortable retirement for a couple, they would need $690,000 of superannuation at age 67 combined to achieve this. They define a comfortable retirement as living off of $73,337 per year, inclusive of things like health insurance to holidays and everything in between.

I think this number is okay as a guide ONLY. This number and situation really looks at retirement as a straight line – meaning that both members of a couple are age 67, both members stop working at the same point being 67 and live off the same amount each year until their statistical life expectancy’s. What you need for retirement I find differs greatly from person to person. Things like someone’s health, life experiences or goals will change what is needed.

Just to throw a scenario that isn’t a straight line which I have tried to put simply (not taking into account returns whether negative or positive) - a couple with $400,000 in superannuation might want to retire at 63 and go on 1 big overseas holiday every year and will spend $100,000 per year inclusive of living expenses and holidays for 4 years (until age 67), which at that age, they might have …

Currently the way the regulations are set for superannuation is that when you meet a condition of release or attain age 65 – you are eligible to create an account-based pension with your accumulated superannuation. The benefits are that the earnings within the fund will now be tax free (0%) whereas currently in the accumulation phase of superannuation they are taxed up to 15%.

Now, regulators such as APRA have suggested in the past years that over 1 million accounts could be eligible to commence an account-based pension and benefit from tax free earnings, however these accounts were still stuck in accumulation phase and paying up to 15% tax on the earnings still.

As an example on a balance of $100,000, if a fund earnt a 7% return for the year (or $7,000) – this could mean up to 15% tax may be paid in the accumulation phase which would be approximately $1,050. Now if this account was held in an account-based pension, then this tax would no longer need to be paid by the fund, resulting in more money in the investors pockets to help provide for their retirement. This is one of the big incentives of superannuation in the first place, it is a concessionally tax environment whilst you are still working/accumulating wealth, then in …

I recently saw an article by 9 news on the 10th of September 2024 – called “Man discovers monumental mistake with superannuation account”. You can view the article here. 

From what I could see from what they wrote was:

• A man – Kevin retired due to a health scare
• He checked his super fund and found 2 random women were listed as his children and beneficiaries of his superannuation fund.
• He doesn’t have any daughters.
• The super fund said it was a manual error – not a result of his account being “hacked”.

The media again like to sensationalise things and calling it a “monumental mistake”. My initial thoughts are that the chance of the superfund actually paying the superannuation benefit to these women in the event of his death was unlikely as superannuation can only be paid to a spouse, or de facto partner, a child, interdependent, other financial dependants or your legal personal representative. These women don’t fall under any of these categories. The super trustee’s when paying a benefit need to check that the beneficiaries are who they say they are and provided the super fund did the correct checking if he did pass away, this would mean that they would find these women ineligible as they are actually not his children or …

When I hear this statement and ask a client what it means to them. They usually think of the “Balanced” option like a seesaw, such that if you are sitting on one end of a seesaw and someone of equal weight is sitting on the other end – the seesaw doesn’t move. This is because they are equal 50/50 weight and are truly “balancing” each other out.

However, when we look at what the AustralianSuper Balanced option is invested in (as per the image above) – it to me has growth assets of approximately 76.5%. Some people identify growth assets differently, my calculation/interpretation to get to 76.5% is taking into account Australian Shares, International Shares, Private Equity, Infrastructure and Property – which I consider “growth assets”. These are generally but now always more volatile than “defensive assets” such as Credit, Fixed Interest and Cash. So, with 76.5% in growth assets this leaves only 23.5% in defensive assets.

This differs from some consumers who are thinking their “Balanced” option is like a seesaw with a 50/50 split between growth and defensive assets. It is important that regardless of which fund you are in, you have an investment strategy that aligns with YOUR needs. When you are trying to compare – just remember a …

NO. Well not really no… superannuation isn’t actually an investment so the question doesn’t make sense. It is a common misconception that superannuation is an investment. It is though a place/entity where you CAN hold investments within. Superannuation is just another environment to hold investments just as you can hold investments in your own name, a company’s name or a trusts name.

When it comes to holding investments inside superannuation it does come with certain rules and regulations around it. These are but not limited to, restrictions on when you can access your money personally, rules around what you can invest in and how much you can contribute to the superannuation environment.

It is not all restrictions though, given these restrictions – it also then comes with tax concessions that are available to you when you are working and also in retirement. The general idea is that superannuation is there for the sole purpose of funding your retirement when you are 60 onwards - the government gives you these restrictions and also these benefits to help maximize what is actually left for your eventual retirement.

With the funds inside your superannuation, you do have control to a certain extent as to what you invest in – it’s …

Finding a financial adviser that you know, trust and is licensed can be difficult sometimes. For starters financial adviser can also be known as financial advisers/advisors/planners, wealth managers, investment advisers along with a multitude of other names. Some people may even call themselves financial advisers and aren’t correctly licensed. The quickest way to see if who you are dealing with is licensed to provide advice is to look at the government register here. Every financial adviser in Australia who is licensed must be registered with ASIC (Australian Securities Investment Commission).

An AFSL or also known as an Australian Financial Service License is what is needed here in Australia to be able to provide advice. Every licensed financial adviser in Australia must practice under one.

AFSL’s can be operated by various organisations. Financial adviser’s can sometimes operate their own AFSL, or it can be through a different organisation and even superannuation funds can even operate their own AFSL. So, when receiving advice, it is always good to check if there are any conflicts with what product you are recommended and where the financial adviser is licensed through. Additionally it is confusing for consumers as accountants …

I hear this statement often “I need to wait until I am 67 to retire”. Depending on one’s individual circumstances, this might not be the case and is dependant on what you are trying to achieve. I hear this a lot due to 67 being the age where if someone is eligible for the Centrelink Age Pension -they can claim it.

No Social Security

First, not everyone is going to be eligible for the Age Pension due to assets or income being above the limits. So, working until age 67 because you have heard it through “the grape vine” is not usually necessary.

However, it is always a question of in retirement what income do you need (your living expenses)? Then working backwards from there on how you will get that income.

Provided you are over the age of 60, you can access any accumulated superannuation to help start “living off of it” if you retire. With this income from your superannuation, you may be able to support your living expenses, or you may have other assets outside of your superannuation like an investment property with rental income you can use.

If you are retiring prior to age 60, it is important you have sufficient assets outside of superannuation to sustain your living expenses, knowing that at 60 you can then access your …

A common misconception with TTR Pensions is the fact that consumers think to commence one you need to reduce your working hours. This is not the case and even if you are still working aged over 60 and prior to age 65 (and haven’t met any other condition of release to access a normal account-based pension) – you can commence one, regardless of your working hours.

What is a TTR Pension?

A TTR Pension is simply moving your superannuation held in accumulation into a type of income stream where you can start accessing it. The criteria is essentially being aged 60 (preservation age). It is irrespective of if you are trying to “transition to retirement” or not.

Your money also can still be invested, with the same or a different approach as to what your superannuation account was invested like. Unfortunately, there are no “extra” tax concessions with a TTR Pension. Earnings within the fund are still taxed at up to 15% like superannuation. However, when you meet a further condition of release of superannuation (such as reaching age 65). Then the TTR Pension can be converted to a normal account-based pension (ABP) where earnings are not taxed at all! Note – prior to 1st of July 2017, TTR Pension’s did used to carry the same tax concessions …

Most superannuation funds give you choice of who you can nominate as a beneficiary to receive your super benefits in the event you pass away. I say most as here in South Australia for example, the state government super scheme (SuperSA Triple S) has a different set of rules where it automatically gets paid to a surviving spouse or you can choose to nominate your Legal Personal Representative (i.e. your Estate).

Whether who you nominate is a valid nomination or isn’t a valid nomination is often discussed. Generally only a dependant can be nominated, and if you don’t want it to go to a dependant, then you can nominate your Estate (for it to be administered as per your instructions in the Will for example).

Who is a dependant? Dependant’s can be:

• Your spouse or de facto spouse
• Your children (including step and adopted children of your spouse)
• a person who lives with you in a close personal relationship and depends on you financially. They may provide you with:
  • domestic support and
  • personal care

I have come across people nominating for example their sibling as a death benefit nomination on their superannuation fund. Now in reality although it might say it on your statement that your sibling is the beneficiary as this is who …

Super accessibility is a topic that gets brought up often and some of the rules have changed around this. In this blog post I am only going to focus on some age based and retirement conditions of release. Noting there are other potential ways of accessing your super such as illness and compassionate grounds with their own sets of rules.

Being age 65

At the moment with the current rules set by the ATO – the current age regardless of if you are working or not is 65 where you can access your superannuation in full. This includes being able to withdraw it in full or at this point you also have access to an “account based pension/income stream”. A big benefit of these income streams are that all earnings from the fund in an account based pension are tax exempt. It is important to seek advice in this area as there are some potential detriments to these pensions for example if you are planning to receive JobSeeker from age 65 to your Age Pension age at 67, Centrelink will assess the value of your income stream (or if you withdraw your super – they will assess this also).

Retirement at preservation age

Another way of being able to access your superannuation is ceasing a gainful employment arrangement, retiring and never intend to be …