September last year I turned 60. I celebrated by taking a 5 week holiday to England and Ireland, staying with friends nearly every step of the way. It was a fantastic holiday that will live on in my memories for the rest of my life. But it was significant for another reason. In Australia, when you turn 60 you can access your superannuation tax-free.
I really don’t want to work again, not even as a highly-paid relief teacher, so it was definitely time to get moving on switching gears from Accumulation to Pension modes on my super.
It was a strange experience, and one that I thought might be interesting for others to read. Most of my readers here are still working and so are still in the Accumulation mode of building up superannuation and investment portfolios. What’s it like to stop doing that and start pulling money out of these accounts instead? And not little dribbles of dollars.
It was a strange feeling, but not as weird as I thought it might be for a naturally frugal person like me. I thought I might have to have a cup of tea and a nice lie down after setting it all up, but that wasn’t the case.
For the last 3 years, ever since I retired at the end of 2020, I’ve lived off a mixture of dividends, sales of shares and CRT wages. I retired at 57, so I had to live off a financial bridge to cover myself to the age of 60 when I could access my super tax-free.
A couple of months after I arrived home from my trip, I sat at my laptop, trying to access an online tool from Hostplus to see what my options were. It seems that they’ve deactivated it, so there was no alternative but to speak to someone on the phone.
Before I did this, I re-read Noel Whitaker’s book on Super, just to make sure that I didn’t sound like a goose on the phone. This was actually a good idea, as it enabled the conversation to flow far faster than if the Hostplus consultant had to explain Every Little Thing to me.
Talking with the consultant was fantastic, as you have to fill in a form inline and there were a couple of times when I wouldn’t have known which alternative to choose, but she walked me through it. Clearly, she knew which questions were the problematic ones and so knew how to guide me. Phew!
I was amazed at how flexible it was. Bottom line, I know that it’s my money, but I suppose that a lifetime of being told how much I’m going to earn, how much tax I’m going to pay etc has made me used to having restrictions.
Switching from an Accumulation fund to a Pension fund is pretty much total freedom. If I wanted, I could withdraw every last cent and spend it however I choose. Yikes! I’m not going to do this, obviously.
But I have the freedom to do it, which is fair enough. It is my money, after all. And truly, if I’ve reached the age of 60 and I haven’t yet learned fiscal responsibility, then I probably deserve the consequences of every disastrous mistake I’d go on to make.
I had to nominate the percentage payment that I’d be taking out of the fund. Basically, every year after you switch to a pension fund, you HAVE to take money out of it. The lowest percentage is 4%, with the choice of the actual percentage that you take out being up to you. I chose to take the minimum out, which still nets me a healthy 50% of the amount I want to live off (including expensive travel.)
I have other investments that will spit out what I need to make up the shortfall. And if they don’t? Then a simple phone call means that I can change the payment details. Or I could live more frugally, which, knowing me, would probably be the way I’d go.
I can change this percentage at any time. I can also take lump sums out, which will be nice when I want to upgrade my car, for example. Not that I’m in a hurry to do this. I love my little Golf.
Once all of that was chosen, I then had to choose how I wanted that money to come to me. Annually? Quarterly? Monthly? Fortnightly? Weekly?
This for me was a no-brainer. I’ve been paid fortnightly for my whole career, so this is how I’m used to organising my finances. So fortnightly it is!
The ONLY thing that has made me miss work is when their online form wouldn’t accept my driver’s licence information, so I had to post them a certified photocopy. Instead of just grabbing a photocopy from work, I had to go to my local library and PAY for one. Outrageous!
In the last week of December, my first “pay” went into my account. I kept watch on my account all day and it raised a smile when, just like my teaching wage, my super landed in there between 3 PM and 3:30 PM.
Nothing like familiarity!
But how does this actually feel?
I’m pulling money from an account that I’ve spent my whole career building up! It almost feels irresponsible… except it’s actually warming the cockles of my heart.
I was reading the Simple Savings forum this morning when I saw a comment from V on one of the threads: “My super pension went into the bank today. Even after years of getting it I still feel a thrill when I see it.”
That’s how it felt for me when I saw the first one go in. Like dividend payments, it felt a bit like money for nothing. Everyone likes that feeling!
I divvied it up and sent some to my credit card and some to my online bank account, which has a spreadsheet attached so I can save up for various things. It’s divided up into columns for Emergency, Travel, Car. Rates, Pets (this is mainly in case Scout ever comes down with IVDD), and every now and then I’ll add an extra column for Wedding, or Tom30’s house etc.
I’d rather run my life this way with only 2 savings accounts, instead of having about 10 of them. Much easier to keep track of.
Then it was a 2 week wait for the next payment to come along. This one wasn’t nearly as exciting, because it was almost exactly the same amount as my yearly timeshare fee. All I had to do was transfer it to my credit card and then pay the bill.
But still, it’s nice to see a chunk of money turn up like clockwork with no effort from me and no fanfare. And to think this will go on for decades!
What I’m really looking forward to is doing my annual figures at the end of the year, seeing what effect, if any, my drawing a wage will have on my Super balance. I’ve heard from other retirees that their balances keep going up, even with the regular withdrawals, so I’m keeping my fingers crossed that I’ll experience the same thing.
Imagine? It would be like the story of the goose who lays the golden eggs, except this is no fairy tale. I honestly thought I’d be more concerned about taking money OUT of this pot. I’m a saver: I absolutely love seeing my balances go up. But instead, I’m strangely at peace with it.
Maybe I’ve finally got my emotions around the concept that this is what all those years of patiently plugging away at building up Super were for.
One thing that I’ve done with my Super is that I’ve hedged my bets a little with regard to work. I’ve paid my VIT fees for this year, just in case I decide to work a few days, but if I worked, that would mean that I’d have to have a valid accumulation fund in place. I asked the consultant about that and she said that most people in my situation leave 6K (the minimum amount) in their Accumulation fund to keep it open, just in case they pick up a little work.
So that’s what I’ve done. When I’m totally, 100%, absolutely positively SURE that I’ll never darken the door of a classroom again, I’ll just close down that account and walk off into the sunset. It’s worth paying the tiny annual fee just for the peace of mind.
As I’m typing this, it’s the summer school holidays, so I can’t help but still feel in holiday mode. My payment popping into my account just feels like holiday pay. When term starts and it still keeps coming… I have the feeling that it’ll be pretty sweet.
Remember the photo at the start of this post? These are the apples that I picked a couple of days ago from the garden. Some of these trees are 6 years old and some are 3 years old.
It’s very much the same as Superannuation… you put the hard work in at the beginning and then later on you (hopefully) reap the benefits.
(The bananas are picked from Aldi, in case anyone was wondering.)
Dad joke of the day: