What Happens to My Super When I Turn 60 in Australia: A Complete Guide
Turning 60 is a significant milestone in anyone’s life, and if you’re an Australian, it’s also a pivotal moment for your superannuation. Many people reach this age with questions about what they can do with their super, how much they can access, and what the tax implications might be. The good news is that reaching 60 opens up new opportunities with your retirement savings, but it’s important to understand the rules to make the most of them.
In this comprehensive guide, we’ll walk you through everything you need to know about accessing your superannuation at 60, including your options, tax considerations, and important decisions you’ll need to make.
Understanding Your Super Access at Age 60
When you reach 60 in Australia, you become eligible to access your superannuation benefits in a way that wasn’t possible before. Unlike younger Australians who can only access their super in limited circumstances (such as severe financial hardship), turning 60 gives you considerably more flexibility.
However, here’s the crucial bit: reaching 60 doesn’t automatically mean you must retire or start withdrawing from your super. You can choose to keep working and leave your super invested for growth, or you can start accessing it. The decision is entirely yours and should be based on your personal circumstances, financial goals, and lifestyle aspirations.
Your Main Options at 60
Continue Working and Leave Your Super Untouched
If you’re still employed and enjoying your work, you can simply continue as you are. Your employer will keep making compulsory superannuation contributions, and your super will keep growing through investment returns. Many Australians work well past 60, and there’s no requirement to access your super just because you’re eligible to.
Access Your Super While Still Working
Another option is to continue working part-time or full-time whilst drawing down on your superannuation. This can provide you with additional income to support your lifestyle or fund hobbies and travel. Your super can remain invested whilst you access portions of it, allowing continued growth potential.
Retire and Access Your Super
If you’re ready to retire at 60, you can access your superannuation benefits in full. This is the option many people choose, as it allows them to stop working and live off their retirement savings.
Tax Implications When You Turn 60
One of the most attractive features of accessing your super at 60 is the favourable tax treatment. Understanding the tax implications is crucial for making informed decisions about your retirement income.
Tax-Free Access
If you’ve reached age 60 and your superannuation is held as a transition-to-retirement income stream or if you’re accessing benefits from an account-based pension, withdrawals are generally tax-free. This is a significant advantage compared to withdrawals before age 60, which may be subject to tax at your marginal rate plus the Medicare Levy.
Lump Sum Withdrawals
You can withdraw your entire superannuation balance as a lump sum when you turn 60, and this will be tax-free. However, before you rush to do this, consider the implications carefully. A large lump sum might affect your eligibility for Centrelink payments if you’re relying on the age pension, and it could push you into a higher tax bracket if you have other income sources.
Ongoing Income Streams
Rather than taking a lump sum, many retirees establish an account-based pension or income stream from their super. This allows you to draw a regular income (monthly, quarterly, or annually) whilst keeping the remainder invested. Income from these streams is generally tax-free once you’ve reached 60.
Centrelink and the Age Pension: Important Considerations
If you’re planning to access the Age Pension, you need to understand how your superannuation balance affects your eligibility and payment rates. The Australian Government, through Centrelink, applies an assets test to determine pension entitlements.
Your superannuation is assessed under the assets test if you’re accessing it as a lump sum or have commenced an income stream. The more assets you have, the lower your pension payment will be. For this reason, it’s worth speaking with a financial adviser about strategies to optimise your Age Pension entitlements whilst maximising your retirement income.
As of 2024, the Age Pension assets test thresholds are:
- Single homeowner: $314,000
- Single non-homeowner: $514,000
- Couple (combined): $471,500 (homeowners) or $671,500 (non-homeowners)
These figures are updated regularly, so check the Services Australia website for the most current information.
What About Your Employer Contributions After 60?
If you continue working after turning 60, your employer must still make compulsory superannuation contributions on your behalf. From 1 July 2024, the superannuation guarantee rate is 11.5% (gradually increasing towards 12%). These contributions will continue to be made until you reach preservation age or retire.
You also have the option to make additional contributions—either concessional (pre-tax) or non-concessional (after-tax) contributions—if you want to boost your retirement savings further.
Important Deadlines and Decisions
Reaching Preservation Age
It’s worth noting that your preservation age (the age at which you can access your super) may be different from 60, depending on when you were born. Australians born on or after 1 July 1960 have a preservation age of 60, but those born earlier may have a lower preservation age. Check with your super fund to confirm your preservation age.
Choosing Your Super Fund
Once you turn 60, you might want to review your superannuation fund. If you’re unhappy with investment returns, fees, or service quality, you can roll your super to another fund. Ensure you understand any exit fees and that you’re not inadvertently losing insurance benefits by switching.
Insurance Coverage
Review your superannuation insurance—both life insurance and income protection. Some insurance policies within super may cease or change once you reach 60 or retire. Understanding your coverage ensures you’re adequately protected.
Practical Tips for Managing Your Super at 60
- Seek professional advice: Consider consulting a financial adviser who understands your complete financial situation. Many offer initial consultations at reduced rates or free of charge.
- Request a projection: Ask your super fund for a projection of your retirement income based on different access scenarios. This helps you plan realistically.
- Review your insurance: Check what insurance you hold within super and whether it’s still appropriate for your circumstances.
- Consolidate your accounts: If you have multiple super accounts from previous employers, consolidating them can reduce fees and simplify management.
- Understand your fund’s investment options: Review the investment strategy and options available. You may want to adjust the balance between growth and defensive assets as you enter retirement.
- Plan for longevity: Remember that you might live well into your 90s. Ensure your retirement plan accounts for a long life span.
Common Mistakes to Avoid
Don’t withdraw everything as a lump sum without considering the implications for tax, Centrelink eligibility, and investment returns. Don’t ignore the impact of inflation on your retirement lifestyle—your spending power diminishes over time. And don’t neglect to review your superannuation regularly; circumstances change, and your super strategy should adapt accordingly.
Conclusion
Turning 60 is an exciting time that brings greater flexibility and control over your superannuation. Whether you choose to continue working, retire
