How to tap into your superannuation and keep working beyond 60

It is common for people to retire in their mid-60s and take advantage of the various benefits available to them through superannuation.

Many people know the benefits on offer to retirees from age 60 onwards. But what if you choose to keep working?

Most Australians intend to retire around age 65, with the average age in 2022 recorded at 65.4 years.

Many, however, choose to continue working — whether it be for financial or personal reasons. It is important to remember that many of the benefits offered through super aren’t just available to retirees.

As a financial planner, I often meet with people in their 60s who are not taking advantage of those benefits.

Here are three simple strategies that may be available to anyone in their 60s, regardless of their employment status.

Transition-to-retirement pension

From age 60, regardless of employment status, Australians have the ability to move their retirement savings into a transition-to-retirement pension.

It allows people to withdraw up to 10 per cent of the total balance as cash. They can then re-contribute the withdrawn amount back into their standard accumulation fund to claim it as a tax deduction.

For example, someone with a balance of $150,000 in super could make a withdrawal of $15,000. It can then be made as a personal contribution to super and claimed as a tax deduction via a “notice of intent to claim a tax deduction” form.

This simple act of moving money around can save someone with an income of $90,000 a year about $2250 (net of the 15 per cent contribution tax).

Remember, there are annual caps on how much you can contribute to superannuation.

Full retirement pension

There are two stages of superannuation.

Accumulation is the normal superannuation that most Australians have. It is taxed at a capped rate of 15 per cent for balances up to $3 million (with Division 296 changes to take an extra 15 per cent on realised earnings from July next year) and accepts ongoing contributions.

But there is a second stage of superannuation that is completely tax-free up to $2 million.

Pension phase is available to individuals aged between 60 and 65, depending on their circumstances. For those aged between 60 and 64, the person must either be unemployed and not intending to work more than 10 hours in any week or ceased a gainful employment relationship since turning 60.

It means that many Australians who are still working can reduce their tax payable by simply moving their retirement savings into pension phase.

Based on the 10-year returns of the balanced MySuper option in the country’s largest industry fund, every $50,000 moved into pension phase will pay $595 less in tax each year.

It means, on average, someone aged 65 to 69 could save upwards of $2396 a year.

Cash accounts within super

Superannuation is simply a tax environment. Its primary focus is to help Australians save for retirement.

However, it can also be used to reduce a tax liability for short-term goals involving cash. Anyone paying tax on their income is also paying tax on the interest they receive from the bank.

Instead, any excess cash could be transferred into superannuation and then pension phase where there is no tax payable.

The vast majority of superannuation products offer cash options, with some retail funds matching the cash rates offered by the big four banks.

It simply means someone can retain their cash holding but have no tax payable on the interest. It is important to remember that any cash held in super will have a delay to access and generally is not guaranteed by the government.

It’s also important to remember that all of the above does not take personal circumstances into consideration and I strongly recommend seeking professional financial advice before moving forward.

Lennon Matthews-Rowell is a financial planner and director of LMR and Co.