When your retirement date is coming up, most people can’t wait to embark on the next chapter of their lives. When you think about super, it’s usually more about how to spend that retirement nest egg than how to add to it.
That’s not true for everyone. These days, we are living longer and staying in the workforce longer than ever. The events over the past couple of years may have delayed retirement plans for many, leaving people concerned they won’t have enough for a comfortable retirement. If that’s you and you have some cash to spare, you may be interested in topping up your super account balance.
Can you contribute to your super in your late 60s? The short answer is yes.
What contributions are allowed?
Once you are in your 60s, compulsory employer concessional contributions can still be made into your super account. When it comes to non-concessional (after-tax) contributions, or voluntary contributions for which you claim a tax deduction, the same contributions caps and rules apply to you as for younger super fund members.
From age 67, you will need to satisfy a work test or be eligible to use the one-off work test exemption before your super fund can accept your contributions. When you turn 75, your super fund is generally unable to accept further voluntary contributions into your super account.
What are the caps (maximum contributions)?
Whatever your age, the general concessional (before-tax) contributions cap is $27,500 each year (2021–22). However, you may be able to carry forward unused concessional contributions from previous years if you meet certain the requirements.
Concessional contributions include your employer’s Super Guarantee contributions and any other mandated award or industrial agreement contributions, salary sacrifice contributions and any voluntary personal contributions for which you intend to claim a tax deduction.
The general non-concessional (after-tax) contributions cap is $110,000 a year (2021–22). For those under 67, you may have automatic access to future year cap amounts with up to three times the annual non-concessional contribution limit. This is called the bring-forward arrangement. It allows you to make extra contributions to boost your super, which may be beneficial to you for your retirement.
Downsize your home and upsize your super
You can give your super account a boost by making a downsizer contribution. If you are aged 55 or over, a downsizer contribution of up to $300,000 can be made into your super account using the proceeds from the sale of your home. For couples, both partners can make a downsizer contribution, so you can contribute up to $600,000 per couple into your super accounts.
You can make a downsizer contribution regardless of work status or other super contributions. Currently, there is no upper age limit for making a downsizer contribution. While these contributions are not tax deductible and don’t count towards your normal annual non-concessional contributions cap ($110,000 in 2021–22), they do contribute towards your transfer balance cap (TBC).
Accessing your super
You may access your retirement benefits at any time if you are 65 or older, regardless of whether you are retired or not. It is possible to withdraw a lump sum or a pension from your super
Generally, under 65-year-olds must meet a condition of release. The most common condition is reaching preservation age and retiring. Alternatively if you are still working and reached your preservation age, you could begin a transition to retirement income stream.
Retirement income
If you are eligible to withdraw your super, you have the following choices:
- An account-based pension: Provides regular, tax-efficient and flexible income from retirement funds.
- An annuity: Known as a lifetime or fixed-term pension, an annuity gives you a guaranteed income for a period of time. This could be for the rest of your life.
- A lump sum (full or partial): When you retire, you may receive your super as a lump sum.
- Or a combination of these.
In retirement, many retirees use an income stream (annuity or account based) to access money they have accumulated in their super fund. Having a regular payment made to your bank account is like having a salary, but is more beneficial, since super income streams are usually tax-free from age 60.
For many, super only makes up a portion of your retirement income. You may also have other investments, savings, or government benefits to consider. Each investment type may affect your Centrelink and taxes differently.
What to do with your super is a big financial decision. You should seek independent financial advice to help you determine the most appropriate strategies for your individual circumstances.
Our financial advisers can help or you can also visit moneysmart.gov.au for some superannuation tips.