If you are nearing retirement, it is essential to do your retirement financial planning imminently. Part of retirement planning is planning what to do with your superannuation.
During the time you work, you have a super fund receiving compulsory contributions from your employer. What you choose to do with your super is one of the most significant financial decisions you will make during retirement.
Most people will end up withdrawing the entirety of their super or converting it into an income stream upon retirement. However, it is possible to just leave it in its accumulation phase.
Read on to learn more about why you could leave your super in accumulation:
It Can Help with Saving and Budgeting
Withdrawing all of your super all at once may lead to bad financial decisions. It may become tempting to immediately purchase something frivolous or to invest it unwisely. This could result in worse financial situations that could make you financially struggle later on.
As long as you have sufficient income from other sources, such as additional assets, you may want to leave your superannuation untouched. Withdrawing it only when necessary helps you keep a financial reserve that acts as your savings and emergency fund. You may find this useful later on when you need it.
It Is Easier to Make Future Super Contributions
Even though you have retired, you may end up finding new employment elsewhere. Returning to work would then mean new super contributions from your new employer. Leaving at least a part of your super untouched will keep the account open to new contributions, saving you from possible necessity of opening a new fund.
Some Life Insurances Are Tied to Your Superannuation
Some insurance plans have the option of being tied to your super. If this is the case for you, it is advised that you leave a sufficient amount of funds in your super account to fund premiums and remain eligible for cover. Withdrawing the entirety of your super could end up in the cancellation of your insurance.
It Serves As a Passive and Continuous Investment
Even when you retire, your super fund is continuously used as an investment vehicle, which could potentially increase in value through additional growth and income over time. With good investments, your super can then have a higher rate of return when you finally take it out. This can be useful, considering that your income may no longer be as stable as when you were working.
It Is Managed by a Professional
Another consequence of taking out your superannuation is that you will have some finances you need to manage personally. However, by choosing to leave it in accumulation, your super will be handled by expert fund managers who have been overseeing it for years.
This is especially useful if you are still unsure about what to do with your super once you have withdrawn it. Leaving it with experts who will invest it for you can put you at ease that they are making the most practical financial decisions possible. This can give you some more time to consult with financial advisers who can guide you on what to do with your money.
Super in Accumulation Phase: Is It Right for You?
Leaving your super in accumulation may not be something that you have considered before. However, when you do so, you avoid unnecessary spending and allow the possibility to further increase your rate of return. It is also being handled by a team of experts while you are still considering what to do with it. So if you are nearing retirement, consider leaving your super in accumulation for these various reasons.
Want to learn more tips to optimise your superannuation? Check out these interesting blogs!
- What You Need to Know About Your Super Contributions
- 4 Benefits of Using Self-Managed Superannuation Funds
If you need more help with retirement planning in Sydney, look no further! Sydney Wealth Advisers will be glad to provide you with a team of experts. Work with us, and we will help you make the best financial decisions. Get in touch with us today for a peaceful retired life!
Disclaimer: The views expressed in this publication are solely those of the author; they are not reflective or indicative of RI Advice Group’s position and are not to be attributed to RI Advice Group. They cannot be reproduced in any form without the express written consent of the author. This information (including taxation) is general in nature and does not consider your individual circumstances or needs. Do not act until you seek professional advice. Newcastle Financial Planning Group, Central Coast Financial Planning Group, Sydney Wealth Advisers, Coastal Advice Port Macquarie, and Coastal Advice Byron Bay are subsidiaries of Coastal Advice Group Pty Ltd which is a Corporate Authorised Representative of RI Advice Group Pty Ltd, ABN 23 001 774 125 AFSL 238429