Which super withdrawal option is right for you?

Deciding how you want to withdraw your super when you retire can be a tricky decision. The amount of super you have, your desired lifestyle, and your personal finances are all factors you need to consider. We’ve created this guide to help you get a better sense of your super withdrawal options and understand how the pros and cons of each option might apply to you.

Choosing a retirement income option

What are my options?

There are two ways you can withdraw your super when you retire:

  1. As a lump sum, or

  2. Through an account-based pension.

How does a lump sum work?

Withdrawing your super as a lump sum means withdrawing the entire balance of your super account in one go. Once you make this withdrawal, it’s up to you to manage your money and choose how to invest, save, or spend it.

How does a pension account work?

Instead of withdrawing all your super in one go, you can open an account-based pension through a super fund. You will receive regular pension payments from this account that you can use to fund your lifestyle in retirement, while the rest of the money in the account remains invested and continues to grow.

Some people choose to make a partial lump sum withdrawal from their super before starting their pension account. You also have the flexibility to make additional lump sum withdrawals in the future.

Learn more about the benefits of a Media Super account-based pension

Which option is right for me?

There are a number of things to consider when deciding how you want to withdraw your super, including your tax liabilities, investment preferences, and overall expenses. Here are a few things to keep in mind.

Investment returns

When you withdraw your super as a lump sum, you become responsible for that money. If you choose to invest it, it’s up to you to manage that investment and make sure you’re receiving the returns you expected. You also need to be aware of the cost associated with any investment(s) you choose, which could vary widely depending on how and through whom you invest.

If you move your super into an account-based pension, your super fund continues to be responsible for managing that investment. This means someone else is monitoring your money and doing the work for you to make sure it continues to grow over time. Your super fund will clearly set out administration, investment, and any other fees associated with managing your retirement savings. These may be lower than investing outside of super due to the benefits of scale and pooled investments.

Tax liabilities

If you take out a lump sum and then reinvest it somewhere else, the money you earn on that investment may need to be declared in your tax return. This could result in a higher personal tax liability, as your investment returns may be taxed at a higher rate than the investment returns you were earning while your money was invested in super.

On the other hand, if you keep your super in an account-based pension, it remains invested and any investment returns you earn are tax-free.

Learn more about tax considerations in retirement

Expenses in retirement

When you withdraw your super as a lump sum, the money is yours, and you can spend it how you choose. This may be a good option for you if you’re planning on making any significant purchases or have large expenses soon after you retire.

When you move your super into an account-based pension, you will receive smaller, regular pension payments that you can use to fund your day-to-day expenses. You can choose the frequency and amount to suit your needs (noting there is a minimum annual amount set by the government).

And, if you have any big expenses or want to spend a bit more money on things like holidays, you’re free to make larger withdrawals from your pension account at any time.

Learn more about pension payments

Lump sum

Pension

Withdraw all your super in one go

Receive smaller, regular payments

Manage your own money and invest it however you choose

Keep your money invested as super so it grows over time

Keep your money invested as super so it grows over time

Enjoy tax-free investment earnings through your super fund

Have immediate access to all your money to spend as you wish

Choose if and when you want to make larger withdrawls from your account

Opening an account-based pension

Opening an account-based pension with Media Super is quick and easy. All you need to do is complete an application form and provide certified proof of identity. You can even manage your account-based pension securely online through our member portal.

Learn more about opening a pension account

Professional advice to help you make the right choice

Understanding which super withdrawal option is right for you can be challenging, and there are a lot of factors to consider. That’s why it can often be helpful to seek professional advice before making any decisions. Our Helpline Advisers are able to provide limited advice on retirement planning, or, for more comprehensive advice, they can also connect you with a CERTIFIED FINANCIAL PLANNER (CFP®).

Call our Helpline on 1800 640 886 to get started.