What is a retirement income stream?
An income stream is simply a way of receiving a regular income, and it’s how many retirees access the money that they have built up in their super fund. The regular income is like getting a salary but better because super income streams are tax-free for people over 60 years of age.
Why does it matter?
The Government Age Pension is currently under $1000 per fortnight for a single and well under $750 each for a couple. For most people this alone won’t be enough to fund the type of retirement they would like – this shows the importance of having other income, especially from super.
When you retire and you have superannuation, you generally have the option of:
a. Getting your super fund to pay you a regular income stream
b. Withdrawing your super as a lump sum
c. Or a combination of a. and b.
More Australians are realising the benefits of getting their super fund to pay them a regular income via an income stream. This option allows you to start accessing your super while the balance remains invested. Often you can also supplement your income stream with the Government Age Pension (see below).
What is an account-based income stream?
Most income streams are account based, that is you set up an account with your super fund, transfer a portion of your super to the account and then your fund pays you the amount you choose (subject to minimum drawdown requirements). The balance of your income stream account remains invested just as it was while you were working.
It’s like a regular income. It’s your money and you stay in control.
Different super funds offer different income stream products, and your super fund will be able to give you all the details of its particular income streams, including minimum transfers and withdrawals.
Most funds however offer two common income stream products:
- A transition to retirement income stream for those easing back on the hours they work
- A retirement income stream for full retirees who no longer work for a wage.
The choice of product depends on your retirement goals and whether you want to continue working or not.
Of course, you must be able to access your super before taking advantage of an income stream.
Don’t forget the minimum
Many people don’t realise there are also minimum limits you can withdraw, depending on your age. They’re known as minimum drawdowns.
Under the current superannuation rules, the minimum amount you must ‘draw down’ ranges from 4% for a retiree between the age of 55 and 64 years, up to 14% for a retiree aged 95 years or over.
The amounts you draw down will also affect your Government Age Pension payment amounts and eligibility. For more information about Government pensions, visit our pensions page.