You can withdraw your superannuation at 55 if you have reached your superannuation preservation age, as shown in the table below. You will have limited access to your savings if you are still working, but may have full access to your super in the form of an income stream or lump sum if you have permanently retired. There may be tax consequences associated with withdrawing your superannuation.
Read more here about the superannuation retirement rules.
If you were born prior to 1 July 1960 you may be able to withdraw your super at 55.
The amount that you are able to withdraw and the way in which you can withdraw it will be discussed later in this article. I will also explain the taxation consequences of such withdrawals.
Age 55 is the ‘Preservation Age‘ for people born prior to 1 July 1960. The Preservation Age for people born after 30 June 1964 is age 60. If you were born in between these dates, your Preservation Age will be somewhere in between, as detailed in the table below:
|Date of Birth||Preservation Age|
|Before 1 July 1960||55|
|1 July 1960 – 30 June 1961||56|
|1 July 1961 – 30 June 1962||57|
|1 July 1962 – 30 June 1963||58|
|1 July 1963 – 30 June 1964||59|
|After 30 June 1964||60|
Can I withdraw my Super at 55 (Still Working)?
If you have reached age 55 and are working, or intend on returning to work, you should be able to access your super via a Non Commutable Account Based Pension.
A Non Commutable Account Based Pension may also be referred to as one of the following:
Non Commutable Allocated Pension
Transition to Retirement Income Stream (TRIS)
Transition to Retirement (TTR) Pension
In this instance, you commence an income stream with some or all of your superannuation savings and must draw an income stream between a minimum of 4% and a maximum of 10% of the capital value of the pension, as calculated on 1 July of each year.
For example, let’s say you are 56 and plan on commencing a Non Commutable Pension on 1 July using your total superannuation savings of $500,000. In the first year, you would be required to withdraw an income of between $20,000 (4%) and $50,000 (10%). In the second year, if your balance had reduced to $480,000, you would then need to withdraw an income somewhere between $19,200 and $48,000 for the year.
In a Self Managed Superannuation Fund (SMSF) these payments can be taken whenever you like. However, a regular monthly payment or one-off lump sum is recommended for ease of management and administration. If you have a retail or industry account, you will generally receive payments monthly, quarterly or annually.
You cannot withdraw more than 10% or less than 4% in any one financial year.
Can I Withdraw my Super at 55 (Not Working)?
In most cases, you are able to withdraw your super, with no limitations, if you have reached your Preservation Age (55 if born prior to 1 July 1960), have retired and have no intention of returning to work. However, there may be tax implications.
In this instance, you should be able to withdraw some or all of your super as a lump sum and/ or use some or all of your super to commence an income stream.
Where you have permanently retired, there is no need for the income stream to be non commutable. You can commence an ordinary Account Based Pension. This only difference between a TTR Pension and ordinary Account Based Pension is that you are not limited to a maximum income equal to 10% of the account balance each year with an ordinary account based pension, as you are with a TTR Pension.
Why Would I Withdraw My Super at 55?
Superannuation is a tax effective environment, whereby all earnings received from assets within super are taxed at a concessional rate or received tax free if in pension phase (as discussed in more detail here). Therefore, it is generally a good place to house your investments.
However, you may wish to withdraw your super for the following reasons:
1. As part of a Transition to Retirement Strategy
2. To reduce debt.
3. To assist with covering living expenses.
Your individual circumstances will determine whether it is beneficial for you to access your superannuation.
For the most part, unless someone is permanently retired, the main reason for withdrawing super while still working is part of a Transition to Retirement Strategy.
The intention of the Government allowing you to withdraw your superannuation at 55 (or whatever your Preservation Age is) was to allow you to ease into retirement and hopefully work a few more years – even if only part time – and supplement your income with partial drawdowns from a super income stream. They hoped this would allow you to save more for retirement, result in you paying more taxes, drawdown less on your savings (compared to being fully retired) and prolong your request for the Age Pension. All part of the Government’s plan to reduce the impact baby boomers are having on our economy now that they are all beginning to reach the average retirement age.
Unfortunately for the Government, advisers began recommending that their clients utilise these new rules to reduce their tax via a TTR Strategy.
I have shown a working example of a TTR Strategy here.
Obviously a Transition to Retirement Strategy can be commenced within a SMSF also.
Tax Consequences of Withdrawing My Super at 55
Withdrawals made from superannuation by a member over the age of 60 are received tax free. This is not necessarily the case for members aged between 55 and 60.
Let’s break it down.
Your superannuation is made up of two main components – the ‘Taxable’ and the ‘Tax Free’ component.
The ‘Tax Free’ components of your balance consist of contributions made to your super account where a tax deduction was not claimed (aka after-tax contributions). The ‘Taxable’ component effectively represents the remainder and will include SG contributions, Self Employed contributions, Salary Sacrifice contributions, to name a few.
Withdrawing Super at 55 – 59: Income Stream
When you commence an income stream, all earnings and withdraws will be proportionate between these components…… stay with me here…….examples always help:-
A 57 year old has a super balance of $500,000 which consists of $50,000 ‘Tax Free’ component and $450,000 ‘Taxable’ component. By commencing an income stream, these proportions remain static i.e. 10% Tax Free and 90% Taxable. All earnings from investments within the pension account will be allocated to this proportion. All income withdrawn as part of the income stream will be proportionate too.
So, if this member opted for minimum required pension payments of 4% or $20,000 in the first year, $18,000 of this payment would be from the Taxable component and $2,000 from the Tax Free component.
From an income tax perspective, this $2,000 would not be counted as assessable income; however the $18,000 would be taxed at the recipients marginal tax rate. BUT, a tax rebate (not deduction) would be received equal to 15% of the $18,000 Taxable Portion, which would be $2,700.
Withdrawing Super at 55- 59: Lump Sum
You are able to access your super as a lump sum if you have reached your Preservation Age and permanently retired.
If you are aged 60 or more, this lump sum can be received completely tax free,
If you are aged between 55 – 59, tax may be payable on the ‘Taxable Component’. However, you have a lifetime lump sum cap where benefits can be received tax free. The cap in the 2016/2017 financial year is $195,000.
This means that you can make lump sum withdrawals from the ‘Taxable – Taxed’ component up to $195,000 at any stage between age 55-59 without paying tax on the withdrawals. withdrawals must still be made proportionately from components; however withdrawals from the Tax Free component do not count towards the cap.
If any part of your balance includes the ‘Taxable – Untaxed’ (not overly common) lump sum withdrawal tax of 15% up to the lifetime cap of $195,000 is payable; 30% between $195,000 and $1.415M; and 45% for amounts over $1.415M. These amounts exclude Medicare and other levies.
Accessing Superannuation has strict rules. You should consult an adviser and/or speak with your superannuation provider prior to making withdraws from your superannuation account.
If you would like anything clarified or have any further questions about Withdrawing My Super at 55 or any other topics, please do not hesitate to leave a comment in the section below .