How Do You Actually Access Your Investments in Retirement?

Written By SOTM Team

You’ve been working hard, investing smart, and building that nest egg like the financial queen you are. But when the 9-to-5 grind is over, how do you actually access all that cash without feeling like you're playing a game of financial Jenga? Let’s break it down, SOTM-style. 💸

Step 1: The Two Main Ways to Fund Your Retirement

When it comes to retirement, there are two main strategies to get that money working for you:

1. Living Off Dividends and Investment Income:

  • Think of dividends like the financial equivalent of your investments shouting, "Here, take some money!"

  • Some companies pay dividends (aka a slice of their profits) to shareholders. If you’re holding ETFs, shares, or managed funds, you might be seeing this sweet passive income.

  • The catch? Dividends often yield around 2-4% per year, so if your portfolio isn’t Kardashian-level massive, this alone might not cut it.

2. Selling Down Your Investments (Drawdown Strategy):

  • This one’s like a well-planned shopping spree, but instead of handbags, you're spending small bits of your investments.

  • The 4% Rule is often used as a guide, meaning you withdraw 4% of your portfolio each year. But flexibility is key!

  • Yes, selling can trigger capital gains tax (CGT), but we’ll cover why that’s not as scary as it sounds.

Step 2: Superannuation = Tax-Free Heaven (Sometimes)

In Australia, we’re pretty lucky when it comes to super. If you’re over 60 and your super’s in the pension phase (aka the money-out-not-money-in phase), then those withdrawals are tax-free. And nope, you don’t need to be on the Age Pension to enjoy this perk, it’s all yours!

But, there are a couple of things to watch out for:

  • Under 60? Withdrawals can be taxed.

  • Accumulation Phase? If your super’s not yet in pension mode, you could be up for some tax.

  • Over the Cap? There’s a limit on how much you can shift into pension phase, called the transfer balance cap (currently $1.9 million). Anything over that stays in accumulation and may be taxed.

Step 3: What About Capital Gains Tax?

If you’re selling investments that aren't in super, capital gains tax can apply. But before you panic, here’s the tea:

  • 50% CGT Discount: If you’ve held your investments for more than 12 months, you’ll usually get a 50% discount on the taxable gain.

  • Lower Tax Rates: Many retirees have a lower taxable income, so your CGT might not be as high as you think.

Step 4: Mix and Match for Your Best Retirement Life

The smartest retirees often go for a blend of both strategies. Some years, dividends and passive income might cover the bills, while other times you might sell down a little bit of your portfolio. And having an emergency cash buffer? Absolute must-have.

Final Thoughts

Knowing how to unlock your investments is just as important as building them in the first place. But don’t stress, with a clear plan, a dash of flexibility, and maybe even a little financial advice, you’ll be living your best retired life in no time.

Ready to start investing so you’re retired future self can enjoy the benefits? The Investing Masterclass is open for enrolments RIGHT NOW! So, what are you waiting for? After all the best time to invest was yesterday, but the next best time is today!

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***Please remember our blogs aren’t intended as financial advice - they’re intended only as a starting point to give you a little extra info! For more in-depth advice catered to your personal financial position, please see a certified financial advisor.

SOTM Team
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