I’m 61 with no plan to retire soon. Should I start tapping into my super?

I am a 61-year-old widow. I am self-employed and earn on average $190,000 a year after expenses, with no plans to retire at this stage. I currently have $860,000 in super and contribute the maximum $30,000 a year as a tax-deductible contribution. I own my home outright and also have a negatively geared investment property worth about $2.4 million, with a mortgage of $950,000. Apart from this, I have no other investments and no debts.

Since turning 60, I have been told I can convert my super to a transition-to-retirement fund. I understand there can be tax advantages, as earnings may be tax-free. However, I also understand you must withdraw money from a TTR fund, which can then be recontributed to an accumulation fund if you choose. I have no need for additional income, as I live comfortably on my earnings.

Is there any overriding benefit in converting to a transition-to-retirement fund, or should I simply continue making the maximum concessional contribution each year to my accumulation fund, as I have been doing?

There are still plenty of misconceptions about transition-to-retirement pensions. They were introduced when the government was trying to encourage older Australians to stay in the workforce.

The idea was simple: if you reduced your working hours, and therefore your take-home pay, you could start a TTR pension and draw a limited income stream from your super to make up the shortfall. It was designed as a cash-flow tool, not a magic tax strategy.

Since the 2017 rule changes, there are no special tax advantages. Earnings within the TTR account are taxed at up to 15 per cent, just as they are in accumulation mode. You are also required to withdraw a minimum amount each year, even if you don’t need the income.

That means drawing money out of a concessionally taxed environment and potentially reducing the long-term compounding of your super, unless you contribute it back into super.

In your case, you are working, earning a good income and already making the maximum concessional contributions. You have no need for additional cash flow.

In those circumstances, I can see no benefit whatsoever in commencing a TTR. It would simply add complexity without improving your position.

I’ve just turned 60 and have a substantial super account with Australian Retirement Trust. I’m working three separate jobs and have been told that if I retire from one, I can access my super. What documentation would ART need, and how long should the process take?

An ART spokesperson says that once you turn 60 and leave an employment arrangement, you have reached your preservation age and met a condition of release. This allows you to access your super by starting an account-based pension (such as ART’s Retirement Income Account), purchasing a lifetime income stream, or withdrawing your accumulation balance.

You do not need to provide evidence that you have retired from that job. However, you must complete the relevant form in the Product Disclosure Statement or apply online. Proof of identity is required, but it can usually be provided electronically using your passport or driver’s licence, along with your Medicare card, so certified copies are often unnecessary.

Once ART receives the completed forms and funds are available, it currently takes about five business days to open a retirement income account or receive a withdrawal from an accumulation account.

I am aged 70 and currently receive income from a super fund, as well as a Centrelink part pension. My wife is 60 and has a super fund that is currently exempt from Centrelink and does not affect my pension, as she is under pension age. My wife is a retired hairdresser. She does not work, although she earns a small amount of pocket money. Due to problems with her hands, she is considering starting an income fund from her super.

Will commencing an income fund from her super affect my Centrelink pension, particularly in relation to the assets test, and will her income be added to our assessable assets?

As soon as she starts drawing a pension from her super fund, it will no longer be exempt for age pension purposes.

Meanwhile, a much better option is to leave the fund in accumulation mode until she turns 67 and simply make withdrawals as needed.

We would like to establish an education fund for our newborn grandson. We did this for our own children, and it worked well, but that was many years ago. Can you recommend a suitable fund and outline any issues we should be aware of? We are self-funded retirees.

The main issue when investing for grandchildren is the punitive children’s tax laws. Unearned income of minors is taxed at penalty rates, with earnings above $416 a year effectively taxed at the top marginal rate.

One simple way around this problem is to use an insurance bond. With these, the earnings are taxed within the bond at a maximum rate of 30 per cent, and the income compounds internally each year. Because the tax is paid by the fund, there is nothing to declare on anyone’s personal tax return in the current year.

Within the bond, you can choose the asset class in which the money is invested, ranging from conservative options to growth-focused portfolios. An adviser will be able to guide you on an appropriate investment mix, based on the timeframe and your attitude to risk.

There is no loss of access. The bond can be cashed in whole or in part at any time. But if redeemed within 10 years, the proceeds are taxable, less a 30 per cent rebate to compensate for the tax paid by the fund.

Noel Whittaker is author of Retirement Made Simple and other books on personal finance. Questions to: noel@noelwhittaker.com.au

• Advice given in this article is general in nature and is not intended to influence readers’ decisions about investing or financial products. They should always seek their own professional advice that takes into account their own personal circumstances before making any financial decisions.

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