The benefits of keeping your money in super
We often get asked the question,”When can I access my super and should I take it all out of my super fund?”. Obviously everyone has different circumstances, so there isn’t one right answer but here are some things you should consider before you make the big decision to withdraw all your money out of super.
Super is a good thing
For most people, earnings on your super are taxed at a lower rate than earnings on investments outside super e.g bank accounts, term deposits and shares. This is particularly the case with any money in an account based (superannuation) pension where the earnings are tax free. If you keep your money in super you can invest in cash, property or shares so there is lots of flexibility. Importantly when it is in an account based pension you can get your money whenever you want. But if you cash it all out you could find there is no going back and you miss out on all the benefits of having money in super.
Preservation age – what does this mean?
The earliest most people can access their super is when they have reached their preservation age. This age varies depending on your date of birth, as shown in the following table;
|
Date of birth |
Preservation age |
|
Before 1 July 1960 |
55 |
|
1 July 1960 – 30 June 1961 |
56 |
|
1 July 1961 – 30 June 1962 |
57 |
|
1 July 1962 – 30 June 1963 |
58 |
|
1 July 1963 – 30 June 1964 |
59 |
|
From 1 July 1964 |
60 |
But just because you have reached preservation age doesn’t mean you should just cash out all your super. Unfortunately it is much easier to get money out of super than it is to put money back in.
Can I change my mind?
If you are over 65 and have have taken your money out of super only to now be feeling frustrated with returns you are getting from the banks then you need to meet a work test to start contributing to super again. The exception to this is called the downsizer option. We will share more about the work test and downsizer options in the coming weeks.
If you don’t meet the worktest, or are not eligible for the downsizer option, then it is almost impossible to get money back into super after age 65.
It really pays to get advice on important matters like withdrawing money from your Super. Your Superfund may have financial advisors that can help you with this, so make sure you ask before acting on a whim.
Can money be taken out of super tax free at age 60 to buy a small home to live in if you meet the preservation age?
Hi Trish. There are lots of rules around this and some people have a mix of tax free and taxable super. Genrally to get your super you need to meet what is know in typical industry jargon as a condition of release. For Seniors the most relevant conditions of release are:
You have reached age 60 and have retired / are no longer working
You have reached age 60 and are still working but have commenced a transition to retirement strategy
You are still working but have reached age 65.
the link below to the ATO site will give you a lot more information on this
ATO – How tax applies to your super