Super is typically there to support your lifestyle in retirement.
But how do you access it as ongoing income?
When you retire, you may withdraw your super and invest it however you choose. One option is to invest some or all of your super into an Income Stream. An Income Stream is designed to keep your money in the ‘super’ environment, where it earns investment returns, just like your super did before you retired, and it will pay you a set amount of your money at regular intervals.
The government sets the minimum amount you need to take, but you can take more than the minimum if you want. By setting a minimum, the government hopes to avoid people hoarding their super and aims to encourage people to live a higher quality of life while receiving their super.
The minimum depends on your age. You can see the current minimum that you need to take if you have an Income Stream on the Income Stream page. The minimum is reviewed annually.
If you open an Income Stream with ElectricSuper, you can choose to receive your regular payments either fortnightly, monthly, quarterly, twice a year or annually.
Your Income Stream could be combined with an age pension (whether the full pension, or a part pension) to give you your desired lifestyle in retirement.
For example, if you are 67 in 2022 and retire with $500,000 to invest in an Income Stream and you want to live off $50,000 a year, you may receive a part age pension (this will depend on your other assets and income). Your Income Stream will make up the balance that your age pension doesn’t cover.
In this scenario at 67 the age pension would be just under $8,000 a year and your Income Stream would make up the almost $42,000 shortfall in your desired $50,000 a year income.
In this situation, you’d be taking about 8.4% of your Income Stream balance as income in the first year after retirement (that is, $500,000 x 8.4% = $42,000).
The age pension is means tested and income tested, which means that as the amount you have in your Income Stream reduces (as you take money out of it), the amount you are likely to be eligible for in age pension will go up.
So, if you started out your retirement in the above example, by the time you are aged 77, the amount you could be eligible for in age pension may have increased and may make up almost half of your desired $50,000 a year income. Your Income Stream would contribute the other half of your desired annual income.
Drawing down from the Income Stream in the above example would mean your Income Stream would be exhausted by the time you’re somewhere around 90 years old. After that, you’d rely on the age pension.
You can see the assumptions we’ve used in calculating this example at the bottom of this page.
Obviously you will need to check on your own eligibility for the age pension. There are also other factors that might change the way you use your Income Stream: you may have more or less money to invest in an Income Stream than we used in our example, you might have other investments, you may have a spouse, you could choose to retire earlier or later or you might wish to live off a different annual income amount in retirement.
Your outcomes will depend on your situation.
How can you learn about your situation?
Use our online calculator to see what your situation looks like.
The calculator can be adjusted to show what you can expect if you take more or less out of your super (as an Income Stream). It’s got the details of government legislation built in, so it calculates your age pension only from the age you are likely to be eligible. It also factors in government minimums and maximums to all the different aspects of accessing your super.
You can use the calculator to work out what retiring at a different age could do for your retirement balance and how different levels of income in retirement will affect your money’s longevity.
We’ve also got a quick 1 minute video walking you through how to use the calculator.
How do you set up an Income Stream?
If you wish to set up an Income Stream, use the Benefit Payment form. It instructs us on what you want to do with your super balance – including investing it in an Income Stream.
You can use the form to nominate the bank account you want your regular payments to go into. You can also use the form to choose how you want your Income Stream invested.
Want to know more?
We have a whole web page full of resources for people who are nearing retirement. You can access the Preparing to Retire page of our Learning Hub here:
You can also read more about it in our Preparing for Retirement Booklet which is downloadable as a pdf. Download the booklet here:
Want to know even more?
We can’t give you advice but we can help you understand all of the information for your situation so you can make the most informed decision for you.
Not the right scenario for you?
Maybe accessing an ongoing income isn’t the right scenario for you.
You can learn more about the other 3 retirement scenarios by clicking on the buttons below:
Assumptions used in the calculation above:
Current age 67, current super balance $500,000, desired retirement income $50,000, no spouse, own home outright, investment returns an average of 6.8% per year, annual fees 0.4%, CPI 2.1%, improvement in living standards 1.1%