Retirement sneaking up? Here are three super boosters

Has retirement snuck up on you?

If you’re a worker in your late 50s or early 60s, that might seem like a silly question. By this point, you’ve spent the past forty or fifty years building your career and cementing your financial future.

Your 50s and 60s are the perfect time to review, boost and protect your super savings. Credit: Aresna Villanueva

But going from building your nest egg to being ready to use it requires a little planning to make sure you’re getting the most out of your savings.

Retirement in Australia has changed over the past few decades. A 2020 treasury review of Australia’s Retirement Income System highlighted Aussies are living longer, meaning their savings have to stretch further. Not only are individuals retiring later than they were 20 years ago, they’re also more likely to gradually wind down their hours with part-time work.

Planning for the final years of your working life means taking stock of your savings and goals. Despite this, recent research from the Association of Super Funds of Australia (ASFA) suggests a decent chunk of older Australians haven’t yet done their retirement homework.

The group’s survey of 1500 adults found half of them had not consulted any sources of information about their retirement – including 40 per cent of those aged over 65.

Review and boost

It’s time to review how your super is invested and your risk tolerance. “Depending on the amount of savings you have and your income needs, you might reassess the risk profile of your super investments and take a more conservative strategy now that you are nearing retirement or have retired,” Super Consumers Australia chief executive Xavier O’Halloran says.

“You can discuss the pros and cons of this with your fund.”

This might also be the best season of life to tip more funds into your account, says financial advisor and co-founder of Women on Wealth, Michelle McKindlay.

“For many people in these generations, it’s a time when the kids have left the nest and income earnings whilst working are higher due to career advancement,” she says. That means you might be able to take advantage of super-boosting policies like downsizer contribution rules or making large after-tax contributions.

“Bring-forward” contribution rules may let you make up to three years’ worth of after-tax payments into your fund in one go, which could add up to $360,000.

McKindlay says taking advantage of the home downsizer policy is another way to add a big lump sum into super during your final years of work.

“If you’re over age 55, downsizing from a family home you’ve owned for over ten years can create even more opportunities for lump sum contributions of up to $300,000 for both you and your partner into super.”

Get across ‘Transition to Retirement’ and draw down options

Your funds have been locked away for decades – have you considered how you’ll access the cash when the time comes?

Retirement is a less abrupt process than it was a few decades ago, with many people electing to gradually wind back their hours.

By 2018-2019, Australian Bureau of Statistics figures showed that 39 per cent of retired Australians said that their last job prior to exiting the workforce was a part-time position.

If you’re thinking about taking a similar path, it’s worth understanding how “Transition to Retirement” (TTR) schemes work within your fund.

“A transition-to-retirement strategy can be a tax-effective way after age 60 to start drawing down on super whilst still working,” McKindlay says.

Under transition-to-retirement rules, once you hit the age where you can access your superannuation you might be able to work part-time while also starting to receive some of your retirement funds.

“Whilst you still pay tax on earnings within the pension fund itself, you won’t pay tax on your TTR pension payments after age 60,” McKindlay explains.

Your 50s and early 60s are also a good time to review what the options are for receiving your money once you do retire. Once you’re able to access your funds, you’ll be presented with a range of choices, including leaving your money in your super fund until you need it, taking some or all of it as a lump sum or setting up an account-based pension that pays you regularly.

“You could choose a combination of these approaches,” O’Halloran says. Your fund can provide general information about your options.

Protect your legacy

Your final years of work are a good time to review what happens to your super when you die.

“The process can be confusing, and many people mistakenly believe that super is bequeathed according to your will, but this isn’t the case,” O’Halloran says.

Instead, superannuation account holders must nominate a beneficiary and lodge this nomination with their fund. There are different kinds of nominations you can make, and it’s important to review what these mean in practice.

“Death benefit nominations can be binding, or non-binding. If you make a non-binding nomination, the fund will consider your wishes but does have some discretion when it comes to making a final decision,” O’Halloran says.

You can generally nominate that your super goes to your spouse, your children, or anybody financially dependent on you when you die. Alternatively, you can choose to nominate your estate or legal representative, and then outline details in your will for how to distribute the money.

“It’s also essential to understand that even though your super may have no tax for you in retirement, there can still be tax for your loved ones, in particular any beneficiary not considered your dependant under tax law,” McKindlay says.

“If you have a large taxable component, or if you’re unsure, getting expert advice in this area will help you avoid the unintended consequence of a hefty tax bill for your loved ones.”

This is the fifth part of our six-week Gen Super series, which takes an in-depth look at what to do with your superannuation at each age, from Gen Alphas just starting in their first jobs to Baby Boomers, who are just starting to retire – and beyond.

• Advice given in this article is general in nature and not intended to influence readers’ decisions about investing or financial products. They should always seek their own professional advice that takes into account their own personal circumstances before making any financial decisions.

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This story was created in partnership with Colonial First State. The content is independent of any influence by the commercial partner.