Your Preservation Age: The Key to Accessing Your Super
Superannuation is designed for long-term retirement savings, and access is linked to your 'preservation age'. While retiring at 55 is possible, it doesn't automatically grant access to super, as the preservation age has risen over time.
The Super Preservation Age Table
Your preservation age is determined by your birth date. If you were born after 30 June 1964, your preservation age is 60.
| Date of Birth | Preservation Age |
|---|---|
| Before 1 July 1960 | 55 |
| 1 July 1960 – 30 June 1961 | 56 |
| 1 July 1961 – 30 June 1962 | 57 |
| 1 July 1962 – 30 June 1963 | 58 |
| 1 July 1963 – 30 June 1964 | 59 |
| After 30 June 1964 | 60 |
For those born after June 30, 1964, accessing super before 60 is generally not possible under standard retirement conditions.
Can I Access My Super While Still Working? The TTR Strategy
If you've reached your preservation age but are under 65 and still working, a Transition to Retirement (TTR) income stream might allow limited access to your super. This strategy provides regular income while you work, potentially allowing reduced hours or boosting super contributions through salary sacrificing.
How a TTR Strategy Works
- Start a TTR Income Stream: Transfer some super into an account-based pension for regular income.
- Income Limits: Withdraw between 4% and 10% of the TTR balance annually.
- Tax Implications: TTR payments are tax-free if you're 60 or over. For those aged 55 to 59, the taxable portion is taxed at your marginal rate with a 15% offset.
- No Lump Sums: TTR does not allow lump-sum withdrawals or further contributions to the TTR account.
What About Unrestricted Super Access?
To access your super without restrictions, you must meet a 'condition of release'. Common conditions include:
- Reaching preservation age and permanently retiring.
- Leaving a job on or after age 60.
- Reaching age 65, regardless of work status.
Retirement After Age 60
If you are 60 or older and leave a job, you can access your super without declaring permanent retirement. If you return to work later, new super contributions will be preserved until another condition of release is met.
Limited Circumstances for Early Super Access (Before Preservation Age)
Accessing super before preservation age is limited to specific hardship situations, not early retirement.
- Severe Financial Hardship: Possible with eligible government income support and inability to cover essential living costs.
- Compassionate Grounds: May be allowed for specific costs like medical treatment or preventing foreclosure, assessed by the ATO.
- Terminal Medical Condition: Available with certification from two doctors that you are likely to die within 24 months.
- Permanent or Temporary Incapacity: May be possible if a medical condition prevents or reduces work, potentially through insurance.
- Leaving Australia (Temporary Residents): Temporary residents permanently leaving Australia may apply for a Departing Australia Superannuation Payment (DASP).
The Financial Considerations of Early Access
Accessing super early, even if eligible, reduces potential compound growth and can have tax implications, impacting your final retirement funds. Careful planning is vital. For more information, visit the Australian government's Moneysmart website.
The Impact of Accessing Your Super Early
Early access means less money is invested and growing, potentially leading to a smaller retirement nest egg. Tax implications also need careful consideration.
How Your Super is Taxed
- Under 60: Taxable portion of lump sums due to hardship/compassionate grounds is generally taxed at a concessional rate. TTR payments are taxed at your marginal rate with a 15% offset.
- Age 60 to 64: Super payments upon leaving employment are generally tax-free. TTR income streams are also tax-free.
- Age 65+: All super withdrawals are generally tax-free.
Strategic Planning for Retiring Before 60
If retiring before the preservation age of 60 is a goal, consider alternative income sources and investment strategies outside of super. Consulting a financial advisor can help navigate the rules and create a plan.
Conclusion: The New Reality of Early Retirement
The ability to retire and access super at 55 is no longer standard for those born after July 1964, whose preservation age is 60. While TTR offers limited flexibility, unrestricted access at 55 is generally not possible under normal circumstances. Early access requires meeting specific, limited conditions. Careful planning is essential to understand the rules and their long-term financial impact.
