Retiring soon? Top 5 choices Aussies make with their superannuation money

The choices include converting your superannuation into a regular income stream or taking a lump sum.

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Upon retiring, Australians typically take one of five actions with their superannuation nest eggs, according to new research from Australian life insurer, TAL.

According to TAL's Retirement White Paper, the most popular choice among retired Australians is converting their superannuation into a regular income stream via a pension account (34%).

The second most popular choice is leaving their money in their existing superannuation account (27%), followed by taking all of it or some of it out in a lump sum (15%).

About 11% of retirees moved some of their superannuation monies into a lifetime income stream, such as an annuity, and some of it into a regular income stream or pension account.

About 7% of retirees moved all of their superannuation into a lifetime income stream.

Were retirees happy with the decisions they made?

With the benefit of hindsight, it seems many Australian retirees would have made different decisions.

The TAL research showed only 56% of retirees who withdrew all or most of their superannuation said they were 'happy' or 'very happy' that they made that decision.

By contrast, 87% of retirees who moved their money into a lifetime income stream or a pension account were 'happy' or 'very happy' with that choice.

Ashton Jones, General Manager of Growth, Retirement & Wealth Partnerships at TAL, said there was a misconception that all decisions made in relation to superannuation were set in stone.

He said:

One of the misconceptions around taking up retirement products is that the decision is irreversible – and while this may be the case for some traditional annuities, lifetime income solutions can be designed flexibly to offer a range of exit pathways, from spouse or death benefits to the simple option of withdrawing from the product at any time.

There was a surge in superannuation benefits paid out last year amid more baby boomers retiring.

Average superannuation balance at retirement

The retirement age is generally defined as the time of life when you become eligible for the age pension.

The retirement age in Australia is 67 years.

According to the Australian Taxation Office (ATO), the average superannuation balance for an Australian aged 65 to 69 years is $428,738. The median is $207,540.

How much superannuation do you need at retirement?

The AFSA Retirement Standard says Australian couples need $690,000 in superannuation, plus a part-pension and debt-free home ownership, to afford a 'comfortable retirement'. Singles need $595,000.

Alternatively, just $100,000 in superannuation for couples and singles, plus a part-pension and full home ownership, is enough for a 'modest retirement'.

A comfortable lifestyle for retirees aged 65 to 84 years old costs $72,663 per year for couples and $51,630 for singles, according to AFSA.

The comfortable retirement standard allows for daily essentials costs, such as groceries, transport and home repairs, private health insurance, lots of exercise, leisure, social activities, occasional restaurant meals, an annual domestic holiday and a trip overseas every seven years.

A modest lifestyle costs $47,387 for couples and $32,915 for singles. It allows for the daily essentials plus basic health insurance, occasional exercise, leisure, and social activities.

AFSA's estimates assume retirees draw down all their superannuation capital and invest it with a return of 6% per annum.

Motley Fool contributor Bronwyn Allen has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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