Income in retirement

Video transcript - Income in retirement

Hello, and welcome back to our Retire Happy series.

It's important that you understand where your retirement income can come from.

Let's look at three possible sources of income.  

Firstly, there's your super. Secondly, you could use other assets such as shares, savings, or a rental investment. Thirdly, you might be eligible for a part or full age pension.  

Your income in retirement could come from one source or a combination of sources. If super forms part of your retirement income, it's important to understand the different types of accounts and their purpose.

The first is your super account for when you are working which is your savings account and the second is your income account which is your retirement spending account.  

While working, your super accumulation account pays 15% tax on investment earnings, has restrictions on withdrawals, and can't provide you with regular payments.

Super funds also have income accounts. So, once you retire, you can move your funds from your super account into an income account.

There are several real advantages when converting to an income account.

If you are age 60 or over,  there is no tax on your investment earnings or income payments and you can make lumpsum withdrawals at any time.

You can nominate your spouse to receive your income account on your death and more importantly, you can pay yourself a regular income from your account.

Starting an income account can impact Centrelink payments. If you or your partner are under 67, this should be reviewed before starting an income account.  

You must draw down a minimum amount each year from the income account.

Typically, you can receive fortnightly, monthly,  quarterly, half-yearly, or yearly payments. This is your retirement income.

You are required to draw a higher percentage as you get older.  

Looking at the table, as an example, if you are between 65 to 74 and start an income account on 1 July 2023 you must draw down 5% of your balance.

So, if you had 100,000 in your income account, you would be required to draw 5,000 from that account in the financial year.  

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