Can I access my super at 55 and still work?

If you’ve reached your ‘preservation age’ of 55 or older, you might be able to access some of your super and still work. However, if you haven’t, you’ll need special circumstances to apply to dip into your retirement savings so soon. Canstar reports.

Can I access my super at 55 and still work?

According to the Australian Taxation Office (ATO), you need to meet a ‘condition of release’ to access your super money. This means that you’ll most likely have limited options available to you if you want to do this at the age of 55 while you are still working.

But, if you have reached your ‘preservation age’, you may be able to access at least part of your super, depending on your situation. Alternatively, a ‘transition to retirement (TTR)’ strategy might be an option to consider, or applying for special consideration.

If you are part of a defined benefit (DB) pension fund, you might be able to access a pension from 55 too, regardless of when you were born, according to financial regulator ASIC’s Moneysmart website.

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What is a condition of release?

According to the ATO, a condition of release is a requirement you have to meet to be able to cash in most types of benefits from your superannuation. The ATO says the most common conditions of release include:

• reaching your preservation age and retiring
• reaching your preservation age and beginning a transition-to-retirement income stream
• ending an employment arrangement on or after the age of 60
• being 65 years of age (even if you haven’t retired)
• dying (in which case your estate planning, including whether you have a will, will be important).

How does my preservation age matter?

Reaching your ‘preservation age’ is one way you can start accessing your super. This age will depend on when you are born, as follows:
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Source: ATO

The ATO says that you can access all your super if you retire after reaching your preservation age, but if you’re still working and haven’t met a different condition of release such as turning 65, you can typically only receive it as part of a transition to retirement strategy.

What is a transition to retirement strategy?

If you haven’t reached the required age, and are still working, a ‘transition to retirement’ or ‘TTR’ strategy might be one way you can access some of your super and continue working at 55. Moneysmart explains you might choose this option to either:

• supplement your income if you reduce your work hours, or
• boost your super and save on tax while you keep working full-time

Often, such a strategy involves receiving an ‘income stream’ – regular payments from your super while you are still working.

A TTR strategy may help reduce tax before a person retires if they keep working full-time and contributing concessional super contributions.

For others, choosing this approach is about reducing their work hours while still maintaining an income, supplemented by their income stream. Either way, Moneysmart notes that setting up a TTR strategy can have implications for your life insurance if you hold it through super. Additionally, it could impact any government benefits that you (or your partner) receives.

As it can be complex, you may like to consider professional financial advice to learn more about whether a TTR strategy could be right for you.

Read more: How transitioning to retirement works

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What special conditions of release may apply?

The ATO provides information about special conditions of release that could mean you are eligible to access at least part of your super benefits at or before the age of 55, irrespective of whether you are working or not.

As well as severe financial hardship, temporary or permanent incapacity, compassionate grounds, a terminal medical condition, terminating gainful employment and the First Home Super Saver Scheme (FHSS, or FHSSS) may all be grounds for applying to access your super early. The governing rules of your super fund might also be considered.

According to the ATO, investment restrictions, operating standards, and other rules and regulations that apply continue even after members begin receiving a pension from their super fund.

Related: Access your super early

Can I access my super at 55 if I’m retired?

In most instances, it’s not possible to get access to your superannuation if you retire early at 55.

An exception would be if you’ve reached your preservation age, and have started a transition to retirement (TTR) strategy while you are still working.

After you retire, you’ll be more limited in contributions that you can make into your super account as well, which may be worth considering as part of your overall plans for retirement.

Why might I want to withdraw super at 55?

There may be various reasons that you want to withdraw your super at age 55, or even earlier.

The ATO covers special conditions of release that you may be eligible for.

For example, in some situations it may be possible to get approved to use your retirement savings due to hardship, incapacity or illness.

In 2020, many Australians applied to access their super early on the grounds of financial hardship due to COVID-19. While this program closed as of 31 December 2020, it is just one example of how unexpected circumstances could lead you to review your options in accessing your super.

Is it a good idea to access my super early?

Whether or not you want to apply to access your super early – if you have grounds under a condition of release – is a personal choice.

There are many factors that may be relevant for you to consider, further to any eligibility requirements.

Canstar analysis shows how much super people of different ages ‘should’ have in their balance today to be on track to afford a comfortable retirement, with men and women aged 50 well over $100,000 short, on average, based on recent statistics from the Association of Super Funds of Australia (ASFA) and regulator APRA.

While early withdrawal of super may give you access to part (or all) of your retirement savings early, keep in mind that even if you get an Age Pension later in life, there are many retirement planning questions you might like to ask yourself.

Aside from ‘How and when can I access my super?’, some of these could include: ‘When do I want to retire?’, ‘How much money will I need?’, ‘What can I do now to boost my savings?’, ‘What are my other income options?’ and ‘What should I do about property?’

Canstar has a Superannuation and Retirement Planner Calculator that you may find helpful to estimate how much superannuation you need for retirement.

What are the tax implications of withdrawing super at 55?

If you withdraw super at the age of 55, you are under the age at which super withdrawals are usually tax-free (this is 60 years of age).

According to H&R Block Tax Accountants, for people aged 55 to 59, “no tax is payable on the tax-free component of your income payment. The taxed component, however, is added to your taxable income and taxed at your marginal tax rate, less a tax offset equal to 15% of the taxable portion of the payment.”

H&R Block says that the tax-free component may include government co-contributions or voluntary after-tax contributions you’ve made over the years, whereas the taxable component normally includes employer contributions and salary-sacrificed contributions.

If you have applied for a special condition of release to access your super early, additional tax implications may apply. You may like to consider seeking professional tax advice to support you with your decision making if you are considering applying for early release of your super.

Further, if you access your super early but haven’t met a condition of release, the ATO warns any such payments are “not treated as super benefits – instead, they will be taxed as ordinary income at the member’s marginal tax rate. Significant penalties may also apply to you as trustee and to your fund.”

There are also wider implications and risks with accessing your super early, such as potentially reducing your retirement savings.

What age can I withdraw super?

The age you can withdraw your super will generally depend on your preservation age, except if you are applying for special conditions of release.

If you are 55 now, you might like to know what options may be available to you later in your life, separate to considering a transition to retirement (TTR) strategy now. If you’re aged between 60 and 64, you generally need to resign from a current employer to access your super, but you can return to work at any time.

If you’re 65 or older then you can simply access your super and still keep working, either full or part-time, with no special conditions.

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Additional reporting by Tim Smith

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Image source: Dejan Dundjerski/Shutterstock.com