Q I’m turning 60 later this year. Currently married, retired for 5 years, I have a CSS lifetime Super pension that I have been living off. I have accumulated $250,000 in super and have this invested in a balanced investment risk profile. Should I let the investment ride, draw an additional pension or re invest the super on turning 60
A One of the primary advantages of turning 60 is that you can draw an Allocated Pension and the income received is tax free. The other advantage of moving the funds to Allocated Pension is that the earnings within the fund become tax free to the fund. If you need access to additional income then by all means move the money into an Allocated Pension to supplement your income needs.
You will be required to draw income at 4% of the account balance in a Financial Year. So you would need to draw $10,000 over the Financial Year. If you don’t need the income to live on, consider reinvesting the income drawn from the Allocated Pension back into Superannuation. Superannuation earnings are concessionally taxed at 15%. Even though you are retired, you are still entitled to reinvest surplus funds into Superannuation as you are under age 65. However without satisfying a work test this opportunity ceases at age 65.
It has now been 5 years since the GFC hit and the performance of growth funds has generally been negative. In fact the average Balanced fund’s performance over the last 5 years has been -.4% (source Morningstar Australian MultiSector Balanced Fund Index to 31/5/2012) As you are nearly 60, it is important to recognize that your investment time frame should still be long term. In fact you could live for another 30+ years so having growth investments in your portfolio is important.
You are also in the privileged position of receiving a CSS Pension that is indexed to inflation for the rest of your life so the vast majority of the income you receive is guaranteed and not subject to the volatility of the markets..
In terms of deciding whether to change the investments, it will depend on the quality of the investment managers you currently have. The other key factor is whether your appetite to take risk has changed. So review your income needs to see if you need access to additional income. Reconsider your risk profile to ensure that a Balanced approach to investing reflects your appetite for risk and growth investment. Finally review the manager of your funds and seek advice if they remain appropriate.