Text version: Financial decisions at retirement
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Retirement means different things to different people. For some,
it's a definite point in time when work stops and a new phase of
life begins. For others, retirement may be a gradual process
where they vary their working hours as priorities
shift, or perhaps leave employment and then return.
Often, retirement comes earlier than expected, for example,
because of redundancy or poor health.
Whatever your path to retirement, one of the big challenges most
of us face is how to pay for it. The financial aspects are often
complex, and getting reliable and trustworthy information is
Are you ready to retire?
If you're ready to retire but not sure whether your
finances are in good shape, we can help. See How
much money will you need in retirement?, and use these
- ASIC's MoneySmart: ASIC's consumer website, moneysmart.gov.au, can
help you work out how much money you will need for the life you
want. Use the budget planner to take stock of your
present and future spending. The retirement planner estimates the
income you are likely to get from your super and the Age Pension.
It also shows steps you can take to boost your future income from
- Contact Department of Human Services (DHS): A
DHS Financial Information Service (FIS) officer can estimate
how much Age Pension you will get and help you make sense of
your options (humanservices.gov.au).
- See a licensed financial adviser: An adviser
can help you assess your current position, your short and long-term
needs, and develop financial strategies for achieving your
goals, taking into account any tax and social security
implications. See the financial advisers register
to check that the adviser is licensed.
About this booklet
This booklet explains the strategies and actions you can take to
make the most out of your retirement income. Use this booklet, the
useful contacts and resources we recommend, and the calculators and
tips on ASIC's MoneySmart website, to take steps to
improve your financial future.
What this booklet covers
This guide is for you if you're some time away from retiring but
would like to start thinking about your options, or at the point of
retirement and unsure about what to do with your money. It provides
- when you can access your super
- how a 'transition to retirement' strategy can be used to
reduce working hours while maintaining your income
- the benefits and drawbacks of withdrawing your super as a lump
- low-tax retirement income streams
- risky or more complex strategies and investments to think twice
- how to leave an inheritance for your dependants.
What this booklet does not cover
If you have a 'defined benefit super fund', your retirement
benefit is determined by a pre-existing formula. If you're not sure
of your entitlements, contact your super fund.
This booklet does not cover property investments.
The glossary clearly
explains some of the words and terms used in this booklet.
How much money will
you need in retirement?
Everyone's needs and expectations in retirement will differ.
However, research by the Association of Superannuation Funds of
Australia (ASFA) finds that, for a modest lifestyle, a single
retiree needs about $524 per week ($27,368 per year). A couple
needs about $754 per week, or about $39,353 per year, to live
To live comfortably, a single retiree needs about $819 per week
($42,764 per year), while a couple would need $1,154 per week (or
$60,264 per year). This includes a car, clothes, private health
insurance and leisure activities such as entertainment and
holidays, see the table below.
These figures assume retirees own their own home and are
relatively healthy. Figures were correct at the end
of March 2018, but inflation means retirement costs will rise
over time. Go to the ASFA website for more details.
Are your savings enough?
So how much income will your retirement savings provide you
with? Use the retirement planner to
understand the level of retirement income you can expect from your
If you have a partner, talk to them about your expectations,
future plans and the lifestyle you want. You may need to seek professional
And don't forget, most retirees receive some form of Age Pension
payment (see Entitlements from
Weekly expenses for a modest or comfortable lifestyle (couple
who own their own home)
||Modest lifestyle (homeowner couple)
||Comfortable lifestyle (homeowner couple)
|Household goods and services
|Housing - ongoing only
Long-term costs of retiring
Good retirement planning is not just about your immediate living
expenses, but the potential long-term costs too. We are living
longer and healthier lives, so it pays to think about the
costs you may experience in later years.
The average life expectancy for a 65-year-old man is about
19 more years, and 22 years for a woman*. But these are just
averages that do not take into account individual
circumstances. Fifty percent of people aged 65 will live
longer than their life expectancy. Consider how long you want
your money to last, you may live much longer than your current life
*Source: Australian Bureau of Statistics, Life Tables, States,
Territories and Australia (October 2017).
Accommodation costs in later life
One of the largest potential costs in later life is aged care.
If you move into an aged care home, you may be asked to pay:
- a basic daily care fee - this fee contributes
to living expenses like meals, laundry, heating, air-conditioning,
nursing and personal care
- an 'means-tested' fee that depends on your income and
level of care - you will not be asked to pay more than you
can afford or more than the cost of the care you receive
- an accommodation bond or charge - at present,
you can only be asked to pay a bond or charge if your assets exceed
an amount set by the government
- extra fees - if you accept a room with an
extra service status, you may be asked to pay an extra service
You may be eligible for government assistance with the cost of
your accommodation. To test your eligibility for assistance, you
need to undertake an assets assessment.
The My Aged Care website helps you
navigate the aged care system. They also have a national contact
centre (1800 200 422) which operates 8 am - 8 pm weekdays and 10 am
- 2 pm on Saturdays.
Entitlements from Centrelink
Many people in retirement live on a mix of their own savings and
the government Age Pension. The Age Pension is paid to people who
meet age and residency requirements. The rate you receive depends
on the level of your income and assets.
How much will you get?
In March 2018, the maximum fortnightly pension rate was
$826.20 for a single person and $1,245.60 for a couple combined.
You may also be eligible for pension and/or clean energy
supplements. For singles the maximum combined supplement rate is
$81.40 a fortnight. For couples it is $122.60 a
fortnight. Pension and supplement rates are updated in
March and September each year.
You can have a certain amount of income and assets and still
receive the maximum rate Age Pension. If your income or assets
exceed the thresholds, your Age Pension reduces on a sliding
Two tests - the income and assets tests - are used to assess
your eligibility. The test resulting in the lower rate of Age
Pension is applied.
The income test is used to work out your rate of Age Pension
based on how much income you receive. Most forms of income are
considered, including rent, super and employment earnings. A
Government Work Bonus means that your employment income is treated
at a concessionary rate under the income test.
The assets test is used to work out your rate of Age Pension
based on the value of your assets, including property. Your family
home is not included, but deciding to sell your home or other
assets may affect your Age Pension rate.
Under the assets test, there are hardship rules for situations
where you cannot sell a particular asset.
For details of your Age Pension eligibility, and the income and
assets tests, go to the Department of Human
Maximising your income
You may be able to structure your investments and income to
maximise your retirement income.
The Department of Human Services Financial Information Service can give you
information on how your assets and super may impact on your Age
Pension benefits. You may also benefit from getting financial
advice from a licensed adviser.
Even if you don't qualify for the Age Pension, you may be
eligible for other benefits. For example:
- The Commonwealth Seniors Health Card helps
with the cost of prescription medicines and other health
services if you have reached the Age Pension age but do not qualify
for the Age Pension. Go to humanservices.gov.au.
- The Seniors Card is a state and territory
government card that gives discounts on travel and some retail
services. It is available to Australians aged 60 and over. There is
no assets or income test. Eligibility criteria and benefits vary
slightly in each state and territory. Go to australia.gov.au and search
for 'seniors card' in your state.
When can you get
To withdraw money from your super fund, either as a lump sum or
a regular pension (known as an 'income stream'), you must meet a
condition of release. In most cases this means:
- reaching 'preservation age' and permanently retiring from the
workforce - 'permanently retired' means you do not intend to work
in paid employment for more than 10 hours a week, or
- turning 65 - the age at which you have unrestricted access to
What's your preservation age?
|Your date of birth
||Minimum age for getting your super benefits
|From 1 July 1964
|1 July 1963 - 30 June 1964
|1 July 1962 - 30 June 1963
|1 July 1961 - 30 June 1962
|1 July 1960 - 30 June 1961
|Before 1 July 1960
There are exceptions and other ways to withdraw your super
before you're 65. For example, you might use a transition to retirement pension, which
allows limited withdrawals from a pension account for people who
have reached preservation age.
Other conditions of release
Other situations may allow you to access your super before you
retire and reach your preservation age. These include:
- permanent incapacity
- severe financial hardship
- compassionate grounds
- terminal illness
- temporary residents permanently leaving Australia.
Getting your super early usually means you have to pay more tax
than if you leave it in your fund until you reach your preservation
age and meet a condition of release. Some super funds may have
stricter conditions of release, so contact your fund for
Also, beware of illegal schemes that claim you can withdraw your
super early. More information, see Investments to think twice about.
After you have met a condition of release and accessed your
super, you may still decide to return to work. This will not cancel
the original condition of release, or mean that your income stream
payments stop, providing the declaration you made was genuine at
After you return to work, super benefits from your new
employment cannot usually be withdrawn (they are 'preserved') until
a new condition of release is met in the future. However, in some
cases it is possible to start withdrawing your super even
while you're working - for example when you turn 65, or earlier
with a transition to retirement
What can you do
with your super?
When you are eligible to withdraw your super, you have three
- Leave your super where it is for a while
- Start a retirement income stream
- Withdraw as cash, all at once or in stages.
This section summarises the benefits and drawbacks of each
option, although many people use a combination. Your decision may
have tax implications and affect your Age Pension entitlements, so
seek information from a Department of Human Services Financial
Information Service (FIS) officer, your super fund or a
licensed financial adviser.
Option 1: Leave money in super
Option 2: Start an income stream
Option 3: Withdraw as cash
Warning: These options are not relevant for
defined benefit super fund members, whose retirement benefit is
determined by a pre-existing formula. Talk to your fund
or employer for the details.
If you have a self-managed super fund (SMSF), go to the Australian Tax
Office website for more information.
Option 1: Leave your money in super
You can leave your money in super for
as long as you want to, even after you're allowed to withdraw
- You'll have more time: This will allow you to
consider your options and get advice. Your fund might provide
useful services, such as seminars, publications and financial
advice that help your decision.
- You can still contribute: Depending on your
age and employment, delaying your decision may mean you still have
the option to boost your super fund.
- You can avoid selling in a downturn:
If share markets have dipped, you may decide it's a bad time
to withdraw your money.
Pay tax on investment earnings: While your
money remains in your super fund, investment earnings are taxed at
up to 15%. This may be more than the tax you'll be
charged in a retirement income stream (see Option 2
Option 2: Invest in a retirement income stream
This is the most popular way to turn your super into a regular
income for your retirement. It means transferring your super to a
'retirement phase' account within your super fund,
another super fund or life insurance company.
- Pay less tax: Keeping your money in the super
system, in an income stream, means your investment earnings are
tax-free, and for most people over 60, income payments are also
- Replace employment income: Your money may last
longer if you withdraw it in stages as an income stream, rather
than all at once.
- Invest for your future: Your money can be
invested according to your timeframe and
- Lump sum withdrawal: Most funds allow you to
make lump sum withdrawals from your pension account if you want
- Minimum withdrawal: The Federal Government has
set minimum amounts that must be withdrawn from your income stream
each year. This is a percentage of your balance, based on
- Transfer limit: There is a limit on how much
can be transferred to a tax-free retirement phase income stream,
annuity or other guaranteed investment.
Types of income streams
There are several types of income stream investments to choose
from. Some of these options are very flexible, allowing you to
withdraw some or all of your money at any time. Others are less
flexible, but pay you guaranteed income. For the benefits and
drawbacks, and more information to help with your decision
about retirement income streams, see Your income
Option 3: Withdraw as cash
The second most popular option at retirement is to withdraw some
or all of your super as a lump sum. Lump sum withdrawals are
usually tax-free if you are over 60. If you're aged 55−59, or a
public servant with untaxed super, you may pay some tax.
Contact the ATO or your super fund to find out how much
tax you will pay.
- Reduce or clear your debts: Withdrawing a lump
sum may let you clear debts, or pay other necessary expenses,
which will save you money in the long run.
- Withdraw money in stages: You could withdraw a
partial lump sum at regular intervals, or as you need it. This
may have tax and Centrelink benefits, depending on your age.
- Invest outside super: You may want to
take some or all of your money out of super and invest it somewhere
else, such as a low-fee savings account, a term deposit, or
another investment that suits your needs. You might choose
this option if you have short to medium-term cash needs.
For information about investments outside super, see investing.
- Treat yourself: You might be able to pay for
something that wasn't affordable before, such as travel, home
improvements or a car.
- Splurge risk: You may be tempted to overspend
or live beyond your means until the money runs out.
- Lower future income: Spending now will reduce
your retirement income in the future.
- Pay more tax: You may pay tax
on investment earnings outside super. Investments can grow
tax-free in a retirement income stream.
Case study: Robert uses a mix of options
Robert, 65, is retiring with $130,000 in super. He decides to
take out $20,000 in cash to pay for a holiday and some home
He transfers the remaining money in an account-based income
stream. 'I want to be comfortable in my retirement, so fixing up my
house and giving myself additional income to supplement the Age
Pension will do me just fine,' Robert says.
By investing $110,000 in an income stream, Robert will receive
regular income payments on top of his Age Pension. He'll still
have the flexibility to withdraw another lump sum in the
future if he needs to.
Strategies such as equity release and property downsizing could
be considered later if his account-based pension runs out.
The right option for you
You don't have to take an 'all or nothing' approach to your
super when you retire or reach preservation age. You may benefit
from combining a mix of the options and products described above.
- You may keep some money available outside super for day-to-day
expenses and in case you need it for any unforeseen expenses. You
may need professional advice to help you work out how much you
need, but a buffer of 3 to 6 months worth of living expenses is
- You might transfer some of your retirement savings to an income
stream to generate regular income over time.
Your personal circumstances and needs are important when making
your decision. If you're entering retirement with substantial debt,
for example, using some of your super to pay it off may be a
Self-managed super: know what's involved
Managing your own super through a self-managed super fund (SMSF)
generally works best if you want to control your investment
decisions, are willing and able to manage your own affairs, and
understand the complex SMFS rules and regulations.
There are also running costs. These include the cost of
investing, accounting and auditing your SMSF. You need to compare
these costs to what your existing super fund is charging you.
Also, members of SMSFs do not have the same level of consumer
protection as members of most other types of super funds. For
example, members of APRA-regulated super funds may
be more likely to receive compensation for losses suffered as
a result of fraud or theft.
See self-managed super fund
and the ATO website to find out
more about SMSFs. The Australian Taxation Office website has
detailed guides on running a self-managed fund, your
responsibilities as a trustee, the strict rules you need to
follow, and other considerations.
These accounts are popular for retirees who want to withdraw
their super in stages instead of a single lump sum. They are also
known as account-based pensions (and previously, as allocated
All investments have some risk. The value of your account-based
income stream, can go up and down depending on the investments you
choose and how much money you withdraw.
After you open the account, the government requires you
to withdraw at least a minimum amount each year.
This depends on your age. If you're 64 or under, the minimum
is 4% of your account balance at 1 July.
You do not have to transfer your whole super balance to an
income stream account. You can usually receive income payments
monthly, quarterly, half yearly or yearly. Lump sum withdrawals are
also allowed, generally with a minimum of $500 or $1,000. You can
make bigger withdrawals, if you wish, or even close your account
and take the whole balance as cash.
- Low tax: Investment earnings are tax-free, and
income stream payments are also tax-free for most people aged
- Flexibility: You decide the frequency and
amount of your income payments, and can withdraw some or all of the
balance if you need the cash or change your mind.
- Choice of providers: Account-based income
streams are available from many super funds.
- Investment options: Like super during your
working life, you can usually choose investment options
to suit your needs.
- Inheritances: You can make arrangements so
that, if there is money remaining in the account, an income stream
or lump sum will pass to your beneficiaries or estate.
- Ups and downs: In most cases, your money is
not guaranteed, and the value of your account can go up
- Your money may run out: How long your income
lasts depends on your starting balance, the fees you pay, the
investments you choose and their performance, and how much you
withdraw each year.
- Balance cap: A transfer balance cap limits the
amount that can be transferred to a tax-free retirement income
- Minimum withdrawal: You must withdraw a
minimum amount each year.
- Fees: Many accounts have no entry
fees, others may charge up to 5%. Ongoing management
fees also vary widely.
Account-based income streams are popular because of their
flexibility and low tax, but watch out for fees. Choose an
appropriate investment option, and understand that the balance may
not last as long as you do. Rolling money into your
current super fund's account-based income stream might be
convenient, but check how it compares with the pension accounts
of other providers. Use a super comparison website or
see a licensed financial adviser.
Case study: Jennifer opens an account-based income
Jennifer, 63, retires from work with $170,000 in super. She
doesn't need the super now, and a financial adviser recommends
transferring it to a low-fee, account-based income stream. She
initially withdraws the minimum 4% per year, leaving the rest
of her money to grow tax-free in the 'balanced' investment
Jennifer can increase her pension payments or change her
investment option at any time if her circumstances change.
If you've reached preservation age and are working, a transition
to retirement (TTR) pension may suit you. It can be used
to reduce your working hours while maintaining your income or
to reduce your tax, when used in conjunction with increased
concessional contributions. Many super funds that offer
account-based income streams (see above) also offer TTR
The minimum annual withdrawal requirements are the same as
ordinary account-based income streams - for example, 4% per
year if you're 55−64. However, TTR pensions also have an upper
limit on withdrawals of 10% of the account balance
each year, and you will still pay tax on investment
TTR pensions do not count towards your lifetime transfer balance
cap, unless in retirement phase.
- Work less: If youwant to reduce your working
hours but can't afford the drop in income a TTR pension
can top up your reduced salary.
- Reduce income tax: Pension income is tax-free
for those aged over 60. If you're 55-59 you may pay tax on the TTR
income, but you'll receive a tax offset equal to 15%
of the taxable portion.
- Make extra super contributions: By
combining a TTR pension with additional
concessional contributions to your accumulation super fund,
you can top up your super as you approach retirement.
This can work for middle and upper middle income earners
because pension payments and concessional super
contributions are taxed at a lower rate than employment
income. Consider getting advice for such strategies because there
are limits on how much you can contribute to super. See transition to retirement for
more information and case studies.
- Spending, not saving: By accessing your super
early, you will reduce the amount you have left when you do
- May pay tax: If you are under age 60 you may
pay some tax on your pension income.
- Complexity: You may need to pay for
financial advice to understand whether this complex
strategy is right for you.
- Lose benefits: If you have life insurance
within super, make sure that you won't lose insurance
benefits by transferring some of your super to a TTR
TTR pensions can replace some or all of the income you lose if
you move to part-time work. The downside is that spending some
of your super early will leave you with less money in
TTR pensions can also be used to reduce tax, even if you haven't
reduced your work hours, by allowing you to make extra concessional
super contributions without reducing your take-home pay. However,
such strategies can be complex and there are caps on super
contributions. You may need tax and financial advice.
Case study: Susan reduces working hours
Susan has just turned 60 and decides to reduce work to three
days a week to gradually ease into retirement. Her salary will drop
but she can soften the blow by starting a transition to retirement
pension, and making small monthly withdrawals to top up her
Fixed income annuities
If you want a fixed income in retirement, an annuity could be
for you. In return for a lump sum from your super or other
savings, a life insurance company promises to pay you a guaranteed
income for a period of time, or for the rest of your life.
Your guaranteed income amount is decided when you invest in the
annuity, so you know what you'll get from the start. Your returns
aren't affected by share market ups and downs, but the safety of
your money depends on the financial viability of the annuity
Income may be paid monthly, quarterly, half yearly or yearly.
You usually need to invest at least $10,000. Annuities bought with
super money must pay you a certain percentage of the balance, based
on your age.
Types of annuity
- Lifetime: These pay you an income for the rest
of your life.
- Fixed term: These pay you income for a term,
such as 10 years.
- Life expectancy: These pay you income for your
Annuities may be deferred or indexed. Deferred annuities start
income payments at a future date, such as when you turn 80.
Indexed annuities increase payments annually by an agreed
percentage (for example, 5%), or in
line with inflation.
- Fixed income: Your money is not affected by
changes in share or property markets.
- Indexed annuities: These protect you from
the rising costs of living.
- Lifetime annuities: These payments last as
long as you do.
- Fixed-term annuities: Payments are made for a
fixed term. In some cases a lump sum or 'residual capital value'
(RCV) may be returned to you at the end of the contract.
- Beneficiaries: Some annuities let you nominate
a loved one or dependant as a 'reversionary beneficiary'. This
means that they will receive some level of income if you
- Guarantee period: You may choose a fixed term
guarantee period, when some money will be paid to your estate if
you die during that time.
- Money locked away: Once you buy an annuity,
you can't generally withdraw any of your money. However, some new
annuity products do allow this feature.
- Cost of extra features: Having indexed
payments or a residual value may mean your regular income payments
- Conservative investments: Your income may be
relatively low (but steady).
- Competition: At present, only a few companies
offer lifetime annuities.
- Inheritances: Other than during a guaranteed
period, money cannot be passed on to your estate from a
Annuities are less flexible than account-based income streams
but, in return, you get certainty about your future income.
Shop around to compare quotes.
Case study: Peter chooses a lifetime annuity with a guaranteed
Peter is 65 and married. He invests $200,000 in an annuity,
which will pay a regular income of $800 each month for the rest of
his life, increasing with inflation each year. Peter likes the fact
that the annuity has a 15-year guaranteed period, which means his
wife Christine will receive a payment if he dies during that
A range of hybrid guaranteed retirement investments are
available, usually combining some features of account-based
income streams and annuities. Each product is different, so
read the details carefully and get independent
information or advice.
The product providers may use words such as 'guaranteed' or
'protected', but these products may not be as safe as they
sound - you're still relying on the financial strength
and stability of the product provider.
The provider of the hybrid investment may guarantees to pay
you a set annual income for a fixed term or for the rest of your
life. The income amount will vary between providers but
is often 4-6% of your account's starting balance, after fees.
This is often guaranteed regardless of how your investments
Some products have a 'ratcheting' feature, where any investment
gains are 'locked in' every 1 or 2 years. This may guarantee
you bigger income payments in the future. However, if you make
extra withdrawals, your future guaranteed income is usually
- Low tax: These offer similar tax benefits to
other retirement income streams.
- Investment choice: You usually have a range of
- Flexibility: You can make extra withdrawals if
you like (but at the cost of lower guaranteed income payments
in the future).
- Guaranteed income: Your retirement income may
be guaranteed for a fixed term or for life, unless you
make extra withdrawals.
- Beneficiaries: You may nominate another person
as a reversionary beneficiary to receive your income payments if
you die, or your remaining account balance may be transferred
to a beneficiary or your estate.
- Fees: These can be higher than normal
account-based income streams to cover the guarantee.
- Extra withdrawals: These will reduce your
- Income growth uncertain: It may be unlikely
that your guaranteed income increases from its initial starting
point because of the impact of fees and your withdrawals on
- Product complexity: These products can be
difficult to understand.
- Not index linked: Your income won't rise as
living costs increase.
Read the terms and conditions carefully, consider the fees, and
weigh up the costs and risks of these products against the
benefits they provide. While there may have
some attractive features, they can also be complex
and costly. Read the product disclosure statement (PDS) thoroughly
to understand how protection is given and under what circumstances
the income guarantee can change. Each product is different, so do
your research or get advice.
Case study: John withdraws his money early
John, 62, invests $200,000 and is guaranteed income of at least
5% ($10,000) per year. After 5 years of income payments, his
account balance has dropped to $150,000. John's wife then
experiences health problems, so John withdraws an extra $50,000 to
cover her medical costs. This triggers extra fees and a drop
in his future guaranteed income.
planning and wills
It's important to decide how your assets will be distributed
when you die, and to make arrangements to protect your family and
minimise their tax bills. An estate plan includes documents that
explain how you will be cared for, medically and financially, if
you become unable to make your own decisions in the future. For
more on estate planning, see wills and powers of
Your accountant or financial adviser can work with a legal
professional who specialises in estate planning.
Nearly half of all Australians die without a will. If that
happens, or if your will is invalid, the government pays your bills
and taxes from your assets and then distributes the remainder based
on a predetermined formula. Some family members will receive more
But even if you have a will, your bills still affect the amount
of money available to be distributed to your estate.
Superannuation death nominations
Super assets cannot be included in a will, but your fund may
allow you to make a 'binding nomination' so that your super will be
distributed as you wish after you die. This will be binding on the
fund trustee as long as the nomination complies with
superannuation legislation, and the benefit is paid to
somebody who is your dependant under the law, or to your estate. A
dependant may include your spouse, or a child under 18. Children
over 18 are not automatically considered to be financially
dependent, so they may pay tax on your death benefits.
It's a good idea to review your insurance needs, including life
and income protection insurance, as you approach
retirement. If you need help reviewing your insurance
needs, speak to a licensed financial adviser.
A 'non-binding nomination' means the distribution of your super
when you die is at the discretion of the fund's trustees. However,
your nominations are considered and usually complied with unless
there is a compelling reason not to do so.
Binding nomination documents must be completed and signed by the
fund member and witnessed by two people over 18. They must be
renewed every 3 years. If a binding nomination has
expired your super is paid out after your death is at the
super fund trustees' discretion.
Powers of attorney
This is a document that appoints someone to act on behalf of
another in a legal or business matter. This may be a general
or specific power, and may be unlimited or limited to a specific
act. An enduring power of attorney also authorises your nominated
representative to make property and financial decisions for you,
but continues to have effect even if you become mentally
incapacitated at a later date.
Organ donors save lives
For many people, organ donation is an opportunity to give new
hope to others. One organ and tissue donor can save the lives of up
to 10 people. Almost anyone can donate organs and tissues.
Your age, health and lifestyle are not restrictions.
After you die, your organs and tissues cannot be donated without
your family's consent. Often, a donation cannot happen because
families didn't know their loved one wanted to be a donor.
If being a donor appeals to you, find the right time to have a
family conversation - to ensure they know about your wishes.
Visit DonateLife for more information.
Investments to think twice about
The consequences of a poor investment decision, bad advice or
even fraud can be more serious as we get older because we have less
time to make up for losses. Sadly, some people entering retirement
are more vulnerable to investment and insurance fraud than
All the investments described so far in this booklet have risks,
but here are some strategies and products that may be riskier
or more complex than others.
Risky trading products
A wide range of complex trading products are now available
to consumers, including:
- cryptocurrencies - a type of
electronic money, usually a digital token created from code
using an encrypted string of data blocks, known as a
blockchain. They can be bought or sold on an exchange
platform, however these platforms are not regulated, so you
have no legal recourse if the platform fails or is hacked, and
you lose your money.
- initial coin offerings
(ICOs) - digital tokens issued as a way of raising capital
for blockchain projects. You often have no legal rights
or protections and many have turned out to be scams.
- foreign exchange (forex) -
trading in foreign currencies by speculating on the movement
in the value of one currency, compared to another.
- binary options - a bet on the price
movement of a financial product, such as a share or currency,
an index, market or economic event.
- hybrid securities - lending
money to a bank or company in exchange for interest
securities - an investment where two or more securities
are contractually bound together and can't be bought or sold
separately, for example, a share and a unit in a trust related
to the share company.
- contracts for difference
(CFDs) - a way of betting on the change
in value of a share, foreign exchange rate or a market index.
CFDs often use borrowed money, which can magnify gains or
- warrants - used to put a deposit on a parcel of shares and pay
them off over time, or a way to lock in the price of an asset
now but purchase at some time in the future.
- agribusiness schemes
- managed investment schemes that invest
in livestock, farming, horticultural or forestry projects.
They are popular with accountants for their up-front tax
deductions but they may have ongoing costs, the risk of losing
your money is high and they are almost impossible to
Just because investments are promoted through advertisements
doesn't mean they are suitable for you. Even experienced
investors struggle to understand the risks, and make money
from, some of these investments. For more information and
investor guides, visit the complex investments page.
Capital 'guaranteed' or 'protected' investments
These may sound safe, but take extra care to understand the
nature and risks of some complex investments that may have
'knock out' clauses that cancel protection. If you don't
understand how the investment and capital protection are
structured, and how the promised returns are achieved,
you should not invest in the product. See capital
guaranteed and capital protected for more
Unlisted mortgage funds, debentures and
In the past, some of these products have proved to be highly
risky investments and not appropriate for retirees seeking a
secure return. You could lose some or all of your money if the
company or project fails. Read the product disclosure statement
(PDS) or prospectus to see how the investment measures up against
ASIC's disclosure benchmarks. See unlisted
debentures, secured and unsercured notes for more information.
You can also download the booklet Investing in unlisted debentures
and unsecured notes.
While not an investment as such, borrowing to invest, or
gearing, can be a risky strategy because your potential losses are
increased. If the value of your investment declines, you may
receive a 'margin call' requiring you to repay the shortfall
immediately. If you don't have enough cash, your investments will
be sold, often at the worst time. Your home may even be at
risk if it's been used to secure the investment loan. See margin loans for
Early access to super
Except in special circumstances, such as severe financial
hardship, permanent incapacity or other conditions of release (see
Other conditions of release, above), it's
illegal to withdraw your super before you reach your
preservation age and doing so can lead to heavy tax
fines. Some promoters of illegal early access schemes encourage
people to withdraw their super to pay debts or transfer the
money to a self-managed scheme, pocketing a large commission
in the process. Some have even stolen the money or the investor's
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After reading this booklet, we hope you have a better
understanding of the steps you can take to improve your
finances in retirement. We recommend you take these
- Use the retirement planner.
- Visit the Department of Human Services to find out
about the Age Pension.
- Consider the benefits of legal and professional financial advice.
- Think about the benefits and drawbacks of cashing out your
super, or investing it in a retirement income stream.
- Sort out your will, power of attorney and other estate
- Work out your health and other expense needs for
ASIC's website can help you make smart choices about your
personal finances. It has calculators and tips to give you fast
answers to your money questions. Phone ASIC on 1300 300 630
Australian Taxation Office (ATO)
Information on tax, super and self-managed super funds (SMSFs).
or phone 13 28 61
Department of Human Services
Information about payments, concession cards and the Financial
Information Service (FIS). humanservices.gov.au or
phone 13 23 00
Department of Social Services (DSS)
DSS is responsible for Age Pension policy and has information
for seniors on its website. dss.gov.au or
phone 1300 653 227
DSS also runs the My Aged Care website, which has information on
aged care and the costs you may face in retirement. myagedcare.gov.au or phone 1800
Department of Veterans' Affairs
Information for people and the families of those who have served
in Australia's armed forces. dva.gov.au or phone 1800
A free service offered by community organisations and community
legal centres. For more information, see financial
counselling or phone 1800 007 007 (National Debt Helpline)
you can make a complaint
Australian Financial Complaints Authority
On 1 November 2018, a single external dispute resolution scheme,
the Australian Financial Complaints Authority (AFCA), replaced
the Financial Ombudsman Service (FOS), the Credit and Investments
Ombudsman (CIO) and the Superannuation Complaints Tribunal (SCT).
Visit afca.org.au or phone
1800 931 678.
FOS, CIO and SCT will continue to deal with complaints lodged
before 1 November 2018.
Account-based income stream/account-based
pension: A pension purchased with a superannuation payout
on retirement. For most people aged 60 and over, these pension
payments have been tax-free since July 2007. Previously, they
were known as allocated pensions.
Accumulation super fund: A super fund where
your retirement benefit depends on the money put in by you and your
employers, and the investment return generated by the fund.
Age Pension: A regular, fortnightly payment
from the Federal Government when you reach Age Pension age. You
must meet certain criteria to get the Pension.
Annuity: An investment, purchased with a lump
sum, that guarantees to pay a set income for either an agreed
number of years, or for life. Generally, your money is locked away
for a fixed period or for life, though some annuities allow early
withdrawals or for a 'residual capital value'. The income
payments may be indexed each year, often in line with inflation.
Some annuities allow for reversionary beneficiaries.
Beneficiary: Someone who will receive a benefit
or asset in the event of the owner's death.
Binding death benefit nomination: Where the
super fund, in the event of your death, must pay your
superannuation benefit to your nominated beneficiary, unless it
would be unlawful to do so.
Condition of release: A nominated event you
must satisfy to be able to access superannuation savings. Examples
include permanently retiring from the workforce after reaching
preservation age, reaching age 65 or becoming totally or
Defined benefit super fund: A super fund where
your retirement benefits are calculated by a predetermined formula.
Retirement benefits are usually calculated using your average
salary over the last few years before you retire and the number of
years you worked in the company or public service. Market
fluctuations have no effect on the value of your benefit.
Dependant: The spouse, child or any other
person who, in the opinion of the superannuation provider, relies
on you financially. Superannuation legislation defines dependant as
the spouse and any child of the member. For tax purposes a
dependant must be under 18 years of age or financially
Equity release: A way to access the equity in
your home to provide you with additional funds in
Executor: A person specified in your will, or
appointed, to administer the will.
Financial adviser: A person or authorised
representative of an organisation licensed by ASIC to provide
advice on investing, superannuation, retirement planning, estate
planning, risk management and insurance. To check your
adviser is licensed to provide the type of advice you want, search
for them on ASIC's financial advisers
Intestate: Dying without leaving a will. Your
assets will be distributed according to intestacy laws in the
relevant state or territory.
Investment risk: The possibility that your
investment may fall in value or earn less than expected.
Non-binding nomination: Guides your super fund
trustee on who will get your super if you die. The trustee is not
bound to follow these instructions.
Pension: An income stream that makes regular
income payments. Examples include the government Age Pension, an
account-based income stream or term allocated pension from your
Power of attorney: A document that appoints
someone to act on your behalf in a legal or business matter. A
power of attorney may be general or specific and may be
unlimited or limited to a specific act.
Preservation age: The age at which you can
withdraw your super. You must also meet a condition of
Preserved benefit: A super benefit that remains
in a super fund until the member reaches preservation age and,
in most instances, retires from the workforce.
Product disclosure statement (PDS): A document
that financial service providers must provide to you when they
recommend or offer a financial product. It must include information
about the product's key features, fees, commissions, benefits,
risks and the complaints handling procedure.
Reversionary beneficiary: Somebody who receives
a benefit, such as a retirement income stream, or its
remaining value, when you die.
Salary sacrificing (into super): When you and
your employer agree to pay a portion of your pre-tax salary as
an additional contribution to your superannuation fund. This can be
a tax-effective strategy and usually suits middle to higher income
Superannuation (super): Money that you and your
employers put into a special fund during your working life to
provide you with money to live on when you retire.
Transfer balance cap: A lifetime cap on the
amount of super that you can transfer into 'retirement phase
accounts' to pay an income stream.
Transition to retirement (TTR) pension: A TTR
pension allows you to reduce working hours in the lead-up to
retirement without reducing take-home pay, or to continue working
full time and make tax savings by salary sacrificing heavily into
super and supplementing take-home pay with a super pension.
Trustees (of a super fund): People or a company
appointed to manage a super fund on your behalf.
Will: An important legal document that sets out
how you want your assets and other belongings to be distributed
when you die.
For information about other words and terms, see the glossary.
About ASIC and MoneySmart
The Australian Securities and Investments Commission (ASIC)
regulates financial advice and financial products.
MoneySmart is ASIC's website for consumers and investors to
help you make smart choices about money. It offers calculators and
tips to give you fast answers to your money questions. Visit ASIC's
MoneySmart website or call ASIC on 1300 300 630.
ASIC's MoneySmart has calculators, tools and tips to help you
Last updated: 10 Dec 2018