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Home / Retirement planner / Case studies / Case study: Should a wealthy retiree start a super pension or draw on non-super investments first?

Case study: Should a wealthy retiree start a super pension or draw on non-super investments first?

Aakash Mehta Aakash Mehta

As you approach retirement, a crucial decision awaits about what to do with your superannuation benefits. That decision is even more complex if you also have significant assets outside super.

You may have built up investments outside super over your working life or you may have received a large inheritance you can’t put into your super account due to contribution caps. These situations could put you in a position where you don’t need to draw on your super, at least in the short term.

The decision then is whether you should commence an income stream from super or leave it the accumulation phase while utilising investment income outside super. (You could, of course, take the middle way and draw on both your super and non-super savings, but for simplicity we will restrict discussion to a comparison of the two main options.)

Need to know

There are no rules forcing you to transfer your super from accumulation to retirement phase when you retire or reach 65. You can choose the best course of action, depending on your personal circumstances.

Learn more about your options when converting your super into retirement income.

So, if you are undecided about whether to draw retirement income from a super pension or non-super investment income, we outline the key pros and cons of these two options before looking at a case study.

Option 1: Leave super in the accumulation phase

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About the author

Aakash Mehta
Aakash Mehta
Aakash Mehta is a financial adviser and has been working in the financial planning profession for more than 7 years. He has an undergraduate degree in commerce, a post-graduate degree in international finance and a diploma in financial planning. His day-to-day work exposes him to real life financial planning issues around superannuation, retirement, insurance and estate planning, and he contributes to SuperGuide by writing case studies and articles on various financial planning strategies.
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Responses

  1. Anne Sterling Avatar
    Anne Sterling

    Option 1 Personal Capital Gains Event. I am a bit confused. The property sold is outside super? How does the phase of Superannuation have any effect on the tax implications of the sale?

    1. SuperGuide Avatar
      SuperGuide

      The author is referring to the case when super pension payments received were not needed for spending and so were instead invested outside the super system. In this case the earnings on this amount are assessable in the personal income tax return, along with the capital gain.

      If the account had been retained in accumulation phase, there would not have been a requirement to make a minimum pension withdrawal, so that money would remain inside the super accumulation phase where earnings are taxed at a maximum of 15%.
      Best wishes
      The SuperGuide team

  2. Robert Wight Avatar
    Robert Wight

    This is an excellent, worked example and resembles closely our own position, and our own decision, to commence the SMSF Income Stream for the same reasons and same outcome…absolutely better off as our external income is from share dividends, not property. Thanks

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