Are you better off accessing your super earlier?

IT MAY seem like commonsense to leave your super untouched as long as possible, but you might be better off by drawing on it earlier rather than later.

Smiling middle-aged woman

IT MAY seem like commonsense to leave your super untouched as long as possible, but in fact, you might be better off by drawing on it earlier rather than later.

“The misconception is that if you start to draw money off your super, it will run out sooner,” said Tim Southerden, a financial planner at AustralianSuper.

“However, if you access your super as a gradual income stream, or transition to retirement strategy, the tax savings used to boost your super could result in you retiring on more.”

Investment earnings left in a super account can be taxed up to 15 per cent. But when the balance is held in a pension account, it’s tax-free.

You can begin drawing between 4 and 10 per cent of your super as soon as you reach preservation age. This can go towards paying off debt, or — if you’re still working, or phasing out of work — compensating for salary sacrifice contributions.

“Many people are not aware of the tax benefits of starting a pension account. For example, you might wait until you’re 65 and retired before starting a pension account, when in fact, you may have been better off starting earlier — even at 59, on the first of June — which means you could delay a pension payment to your 60th birthday and it’s all tax-free,” Tim said

As always, you should seek qualified advice before making any financial decisions.