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Loading ...I am 60 and have $100K in super. Should I leave in super or withdraw?
August 14, 2008 by Josie Kay
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Q. I have approx $100,000 in Superannuation and I want to retire at the end of the financial year this year. I turned 60 at the end of May. Do I have to invest in a particular income stream for it to be tax free or can I withdraw my Super & put it into, say, ING at 7.9% & draw a small income from this & still be tax free? Do I pay tax on the interest the money earns in the account? I would appreciate your advice.
A: Thanks for the question and congratulations on seeking advice and doing your homework. Far too often we see people making financial decisions without really understanding the impact on their future wealth.
In order to be sure your income will be tax free, it needs to stay within the superannuation environment. It is common for people to transfer their super to an account based pension (previously called allocated pensions) which is simply the vehicle used when you start drawing an income from superannuation.
Should you decide to withdraw from the superannuation environment and transfer the proceeds to a savings account, like ING, you will pay no tax, but the earnings on the investment will be thrown into the same ‘bucket’ as your other income, in other words, taxed up to 46.5% (all depends on your total income and tax rate).
However, if you leave it within super, it is tax free after age 60, including the earnings and capital gains tax free. It just doesn’t get better than that.
Another benefit of leaving it within the superannuation environment is that income you receive from your pension account within the superannuation environment is quarantined. In other words, it is not added to your taxable income.
Consequently, if you change your mind in relation to work, it means you have the potential to save lots of tax.
Having said all the above, it may actually not make a difference from a tax perspective. If you income is quite low, no tax may be payable (currently around $11,000), due to the low income tax offset. Furthermore, once you turn age pension age, you may qualify for the Senior Australians Tax Offset.
If you leave your benefit within super, do a bit of research in relation to the investment options. It appears that you are thinking it is safer to withdraw the money from super and invest in a ’safe’ option like an ING cash account.
If your super fund has a financial planner attached to it, I recommend you contact them to discuss the investment options available as plenty have ‘cash’ investments which you could utilise. Just remember, safe usually means lower returns over the long term (7 years plus).
There is another saying which time and time again proves to be true. Don’t put all your eggs in the one basket.
I wish you a long, healthy and prosperous retirement and Happy Money Organisation. Josie K
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YOU MUST READ THIS: Don’t forget that the above information is general in nature and not specific to your goals and objectives. It is recommended that you seek personal financial advice specific to your needs. Thanks for posting your question on www.askjosiekay.com.
As you know, this is a free service and if you found it useful, I would be chuffed if you told your friends, family, workmates, local media outlets to check out and subscribe to www.askjosiekay.com – free money saving advice by a Certified Financial Planner. No strings attached!
ps. Hope the above helps. I am continually trying to improve this service, your feedback would be greatly appreciated
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I have an investment property and is currrently only just..negative geared possibly nearing positive, I have a surplus amount ($26K) which I can redraw with no penalities - the $26K was funded (post tax) from a redundancy payout and at the time was paid into the investment loan to reduce balance & subsequently monthly repayments, could you please confirm the following.
1. I understand I cannot withdraw this amount for say; personal use or buy a property to be my principal residence ?
2. this amount can be used to purchase another investment property and also increase original investment loan to be more “negative geared ?
3. if I purchase a 2nd investment property and later sell the 1st property, can I use the proceeds (after paying out original loan) to reduce the principal on 2nd property without paying capital gain tax ?
4. if so, providing the 2nd property has been rented out for 12 months I can make it my principal residence and avoid paying capital gain tax until I sell it.? My intention is to have this as my final residence and this would form part of my estate.
5. Would the benefactor(s) of my estate be liable for CG Tax ?
Thank You
Hi Ray< ?xml:namespace prefix = o ns = "urn:schemas-microsoft-com:office:office" />
Thanks for posting a comment. Most of your questions should be answered by a tax professional, but I am happy to provide very general info. To answer your questions.
Cheers and highly recommend you seek advice from a tax professional (I am a financial planner and not the right specialist! We are generalists only). If you don’t want to pay for advice, following is a link to the ATO CGT guide (good luck reading it, but it has helped me on several occasions)
http://www.ato.gov.au/individuals/content.asp?doc=/content/00135935.htm&pc=001/002/042/003&mnu=5392&mfp=001/002&st=&cy=1
YOU MUST READ THIS: Don’t forget that the above information is general in nature and not specific to your goals and objectives. It is recommended that you seek personal financial advice specific to your needs. Thanks for posting your question on http://www.askjosiekay.com. As you know, this is a free service and if you found it useful, I would be chuffed if you told your friends, family, workmates, local media outlets to check out and subscribe to http://www.askjosiekay.com.au – free financial advice by a Certified Financial Planner. No strings attached!
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