Different retirement income streams
When you start thinking about retirement, one of the first questions you should ask yourself is, ‘How much money will I need?’
Once you know that answer, you can start looking at different retirement income streams and determine which will best suit your needs.
Here at North Advisory, we can work with you to help assess the viability of each option and find the most appropriate for your personal circumstances.
Whether it’s a single income stream or a combination of two or more, we’ll make sure it fits your lifestyle… so you can live your dream retirement.
“Retirement income streams provide a structured way to turn your savings into reliable income you can count on.”
How do you determine income needs?
There are many variables that will impact your income needs in retirement. And it will greatly depend on the type of lifestyle you want to live.
But it is important to have a clear understanding of your financial requirements before the security of a regular salary is gone.
An easy place to start is with all your standard expenses… things like your utilities – power bills, phone and internet, council and water rates. The bills that will always be there.
Plus, you want to include other regular costs like vehicle registration or insurance premiums. Calculate everything that you can already identify, then you can move onto the wish list.
Next up you can start thinking about your ideal retirement expenditure. All the ‘nice to haves’ – eating out, holidays, looking after grandchildren, any new hobbies. These expenses combined with your essential spending will give you a solid indication of your income needs.
You also need to think about how often you would like to receive payments; do you prefer to have a lump sum and spend from that, or would regular payments – almost like a salary – be more suitable? Different income streams offer different benefits, so you need to choose the one that works best for you.
Account-based pension
An account-based pension is the most common type of retirement income stream. It draws directly from your superannuation and is tax free. In order to access the funds in your superannuation and start your pension, you need to meet a condition of release.
Most often, this is reaching your preservation age and preparing for retirement. While there is a minimum amount that you have to withdraw from your super each year, there is no maximum.
This means you have flexibility to access as much as you need. Plus, not only does it provide a regular income payment, it also offers the additional flexibility of withdrawing a lump sum.
For example, if you needed to make some repairs to your home, you could immediately access a larger single amount.
You should also note that because an account-based pension relies on invested assets within superannuation, the balance can go up and down with investment market fluctuations.
Annuities
Annuities are another regularly chosen income stream. You purchase an annuity, and it provides you with a regular, guaranteed income payment.
To buy an annuity you can use money from your superannuation or any other savings, and you select a set period of time or even the rest of your life… it all depends on the provider you purchase the annuity from.
People select annuities because they are very stable. You know exactly how much you are going to receive over the term, and it gives sound peace of mind that you will always have that steady income.
But unfortunately, you don’t have the ability to access any lump sums. Unlike superannuation account-based pensions, the balance of your annuity is fixed. It is not connected to investments and therefore will not fluctuate.
Investments and other assets
In addition to account-based pensions and annuities, you might also have other investments or assets and it’s important to consider how they will support you in retirement.
During your working life, it’s possible that you haven’t had to access your regular dividend payments; you might have simply re-invested… but once you retire you will probably start to include them as part of your regular income.
The easiest option is to keep them in your bank account and use them as day to day funds, but it’s important to understand potential tax implications. We recommend discussing how to minimise your tax obligations with a professional.
We can help determine the best way to effectively manage these funds.
“Choosing the right income stream can affect your tax, cash flow and lifestyle in retirement.”
Age pension
There is also the Federal Government’s age pension. This is provided through Centrelink and is means tested.
How much you receive from other retirement income streams and the total value of your assets impact your eligibility and the amount you might receive through this payment.
The more wealth you have, the lower your age pension payments… or you might not receive anything.
It is common for retirees to receive an account-based pension from their superannuation and a part age-pension from the Government.
Again, it’s worthwhile discussing your situation with a financial advisor to make sure you are maximising your income options.
We are here to help
Finding the right balance of retirement income can be difficult, but our team is here to help! We can work with you to determine how much income you will require and then find a tailored solution to meet your needs.
If you want to find out more about our personal wealth management services and retirement planning, contact us today.
About the author
Marius Fourie - Director & Business Advisor
As Director and Business Advisor, Marius uses his accounting expertise and empathetic skills to work directly with business owners and help them feel at ease with their finances.
Marius saw a common need in clients that just wasn’t being met by accounting providers.
That need was for clear, open communication and streamlined accounting services that didn’t come padded out with any unnecessary features.
Business owners just don’t have time to compare different accounting firms to see which one has the best packages with the best inclusions (many of which they would pay for but never use).
Key Takeaways
Retirement Income Streams Convert Savings to Income
They provide a structured way to turn your super into regular payments you can live on during retirement.
There Are Different Options to Suit Different Needs
Each type of income stream — such as account-based pensions or annuities — has unique features that suit different retirement plans.
Tax Treatment Varies by Age and Phase
Tax benefits are often most favourable when you’re age 60 or over and in pension phase, but specifics depend on your situation.
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Frequently Asked Questions
What is a retirement income stream?
A retirement income stream is a regular payment you receive from your superannuation savings once you meet a condition of release, such as retirement or reaching preservation age.
What are common types of retirement income streams?
Examples include account-based pensions, transition-to-retirement income streams and annuities — each with different features, tax treatment and flexibility.
When can I start a retirement income stream?
You can generally start an income stream once you’ve met a condition of release, commonly when you retire after reaching your preservation age.
How are retirement income streams taxed?
Tax on income streams depends on your age, the type of stream and whether your super is in accumulation or pension phase — some income may be tax-free for those over age 60.
Should I get advice before choosing an income stream?
Yes. Professional advice helps match the right income stream to your financial goals, risk tolerance and retirement lifestyle.
Can I take extra money out on top of my regular pension payments?
Yes. You can usually withdraw more than the minimum, either as additional pension payments or lump sums, depending on your fund rules and tax position.
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