Ask the Expert: How to responsibly dip into some of your super while still in the workforce
After age 60, is there any way to access a lump sum of super to pay off an outstanding mortgage without having to cease employment?
As you point out, normally you need to either retire or cease a job to be able to access your super from age 60.
Once you are 60, though, you can access 10 per cent of your super via a transition to retirement pension. They were designed to supplement your income should you go part-time, but there is nothing stopping someone from starting one of these pensions if they want additional income.
You can also take the 10 per cent in one go, you don’t have to spread the income payments out over a year.
Once a new financial year starts, you can then again take another 10 per cent of your balance out.
We have a $1.5 million house, $150,000 block of land and combined super balances of $350,000 and no debt apart from monthly credit card payments (always paid in full). My wife wants a reverse mortgage to “enjoy” life. I don’t, wanting instead to prepare for a costly future when we cannot look after ourselves. Any suggestions to resolve this dilemma?
That’s an interesting dilemma, and I’m sure many couples don’t agree on what they should be doing with their finances.
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It reminds me of a couple who had a windfall of $10,000 – they argued about putting it towards the home loan or going on a holiday. They really did look at money differently and prioritised different things.
Unfortunately, I’m not a relationship expert. But listening to each other’s point of view and perhaps compromising is the way to go.
Have your wife play through exactly why she wants a reverse mortgage. What does she want to do that she can’t do now? How much extra income does your wife want?
Explain your concerns about keeping funds aside to cover emergencies and potential aged-care needs.
Don’t forget to also discuss any estate planning wishes, i.e. did you want to leave any funds behind for children or other family?
Is the block of land on the table? Currently, it’s just sitting there, not giving you any income.
Maybe a reverse mortgage could be looked at in a few years when your super balance has come down? And even then, consider just drawing a small amount from it to top up your other income.
These decisions are just as much about lifestyle decisions as about financial decisions.
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Good luck.
Does the concessional/non-concessional ratio stay the same when you move all your accumulation balance to pension mode?
Within your super fund you would have a “tax-free” element and a “taxable” element.
These mainly come into play in two instances:
- If eligible (which would only be in very limited circumstances), and you withdraw funds before the age of 60;
- Upon death, and you leave the proceeds to certain beneficiaries, then the taxable component is taxed.
All concessional contributions (employer super guarantee and salary sacrifice) plus all earnings go into the taxable component.
Non-concessional after-tax contributions go into the tax-free component.
When you start a pension, the tax components are then crystallised and fixed. For example, if you have a 20 per cent tax-free component, then that 20 per cent stays fixed, regardless of pension payments, withdrawals and earnings.
Craig Sankey is a licensed financial adviser and head of Technical Services and Advice Enablement at Industry Fund Services.
Disclaimer: The responses provided are general in nature, and while they are prompted by the questions asked, they have been prepared without taking into consideration all your objectives, financial situation or needs.
Before relying on any of the information, please ensure that you consider the appropriateness of the information for your objectives, financial situation or needs. To the extent that it is permitted by law, no responsibility for errors or omissions is accepted by IFS and its representatives.
