four common questions about retirement

There’s a lot of information out there about retirement, and it’s hard to know where to turn. If you’re starting to think about winding back at work, it makes sense to begin with the basics.

HESTA’s General Manager of Engagement, Education and Advice Jen Harding joined Bec Wilson on her Prime Time podcast in November 2024 to talk about the most common questions HESTA members ask as they’re approaching retirement.

1. How much super is enough to retire on?

According to Jen, this complex and individual question boils down to how much you intend to spend in retirement, and how many years you’ve got to spend it.

“There are some good rules of thumb in the industry,” Jen says.

“For example, you might want to replace 70% of your current income in retirement, but that gets you only so far in terms of wanting to feel really financially confident.”

Jen says the next step to take is understanding your areas of wealth outside of superannuation, including property and other assets. You might also be eligible for the government Age Pension.

“All these things can add up to an income layering approach to retirement income.”

HESTA members also have access to tools like Future Planner, which helps them model how much Age Pension they might be eligible for together with their superannuation and see how that that plays out over their retirement.

HESTA’s General Manager of Engagement, Education and Advice Jen Harding chats with a colleague.

2. When and how can I access my super, and what if I decide to do some more work?

The magic number to generally access your super for retirement is 60, if you’ve ceased an employment arrangement. And if you’re still working, you can still access your super at 60 by setting up a transition to retirement income stream.

When you reach 65, you can access your super whether you’re still employed or not.

But what if you’ve retired and you want to go back to work?

Jen says there’s no issue with this.

“Life changes and you can return to work for all sorts of reasons,” Jen says. “It could be financial, could be you're seeking social or purposeful reasons.

3. How can I put more into super? Is there a limit to what I can add?

You can make contributions to super both before and after tax.

But Jen explains that because super is such a tax-effective vehicle, there are limits to how much you can put in each year.

“The limit for before-tax contributions is $30,000 per financial year, and the limit for after-tax contributions is $120,000 per year for the 2024-25 financial year. 

“If you're at superannuation preservation age (60 and over), you could consider putting in a little bit more for whatever reason to supplement your retirement income.”

Jen says there are other super strategies to keep in mind here, including catch-up and downsizer contributions which could all help boost your balance.

4. What’s the difference between retaining funds in super and moving into a retirement income stream?

Jen says that a lot of people think they should keep their money in superannuation when they retire and then they take it out in lump sums as they need to.

“A compelling reason you might consider a retirement income stream is the tax savings,” Jen says.

“While your money is sitting in superannuation in the accumulation phase, you pay tax on investment earnings.

“But with a retirement income stream, you generally don't pay that tax which can make a big difference in your overall income.”

Jen explains that there are rules with a retirement income stream set by the government, where you must currently drawdown a minimum of 4% of your balance at age 60, and 5% at age 65. This minimum percentage increases as you age.

This information is general information only. It does not take into account your objectives, financial situation, or specific needs, so you should look at your own financial position and requirements before making a decision. You may wish to consult an adviser when doing this. Information is current at 26 November 2024 for the 2024/25 financial year. For up-to-date information, visit the ATO website.