If you’ve spent your working life contributing to your super fund, the chances are you will have a considerable sum of money waiting for you when you retire.

While this money is meant to provide you with an income in retirement, there are no rules to stop you doing whatever you want with it.

Many Australians are taking advantage of that fact, using their retirement windfall to pay off the mortgage, renovate their home, or buy a caravan and join the grey nomads.

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Statistics from research house Rice Warner show that more than half of all retirees withdraw their super as a lump sum rather than as an income stream.

This has long been a bugbear of the superannuation industry, which has lobbied for a change in the law to require superannuants to withdraw their super bit by bit.

But so far they have gained little traction. In the recent Financial System Inquiry, chair David Murray did not recommend any major change to the status quo. This means it is very likely that when you retire, you will still have the freedom to spend your super any way you choose.

So what should you choose?

Choosing a ‘comfortable’ retirement

There’s nothing to stop you blowing your super at the pokies. Photo: Getty

According to the Association of Superannuation Funds of Australia (ASFA), you need an income of around $43,000 a year if you’re single, and $58,000 for a couple if you want to live a comfortable retirement.

The maximum you can hope to get on the government’s Age Pension, meanwhile, is the rather paltry sum of $22,000 a year if you’re single, or $33,000 a year for a couple.

According to financial adviser with Scanlon Richardson Financial Group, Matthew Hawkins, the ASFA figures are “pretty much spot on”.

“Living on the Age Pension you’re really just breaking even,” he says. “You’ll be able to meet some bills, but not much more.”

A big blowout on retirement would therefore leave you hovering on the bread line.

Plan ahead

Mr Hawkins says the first thing to do is prepare. If you can pay your mortgage off before you retire, you should. You should also consider making additional contributions to your super, even if it means tightening your belt a bit.

“I always try to communicate to my clients the tax advantages of salary sacrifice to superannuation,” he says.

You should also prepare for the unexpected.

“What are the unforeseen events? What would happen if one of your children gets ill, or you need to pay for aged care?” Mr Hawkins says.

Talk to your super fund

These days most superannuation funds will offer to continue managing your money into retirement through what is known as an “account-based pension”. This is normally a much better option than withdrawing your money and putting it in the bank, as it will earn more interest through investments in shares and bonds.

You will receive your money in the form of an income stream, paid out as often as once a fortnight or as seldom as every six or 12 months.

Most super funds will also offer different levels of financial advice, from very basic, over-the-phone advice, to more detailed personal advice.

Cbus’ head of advice and retirement Greg Harper says his funds’ advisers can help members with most of their queries.

Invested well, your super can partly grow back as you draw down on it. Photo: Shutterstock

“The Cbus Advice Team can assist members with a lot of their retirement planning questions such as: should I pay off my mortgage or make extra contributions to my super; how can I reduce my tax and save for my retirement using superannuation; how should I be investing my money to reach my goals; and how can I use my super to help fund my retirement?” he says.

Like most big super funds, Cbus provides this general advice for free.

Consider working longer

We are all living longer, and while that’s a good thing, it brings with it the risk that we will run out of money in retirement. According to Richard Webb, policy and research analyst at the Australian Institute of Superannuation Trustees, one solution to this is working longer.

“Delaying your retirement by working another couple of years – either full-time or reduced hours – can increase your retirement income significantly. As a general rule, every year in the workforce, is worth at least two in retirement. An extra two years in the workforce could add an estimated $40,000 to your final super balance.”

He adds that working part-time is also a sensible option.

“Some super funds offer a Transition to Retirement (TTR) pension that allows members to withdraw an income stream from their super while continuing to work. You can still make contributions during this time, which makes it a tax effective move for some. You can often seek financial advice from your super fund about your options.”

See a financial planner

If you have accrued a lot of money through super, you might consider paying for some personal advice. This does not come cheap, but it may well be worth it.

ASIC’s MoneySmart website says you can expect to pay between $2000 and $4000 for a comprehensive financial plan called a ‘statement of advice’. If you like the plan, you will then pay an ongoing annual fee.

But make sure you pick your adviser carefully. The majority are aligned to the big four banks or AMP, and there has been some dishonest behaviour in the past. A change in the law has gone some way to stamping out bad practices, but as with choosing a doctor or a babysitter, you want to make sure your financial adviser has no hidden agenda.

A growing number of super funds will now also refer you to a qualified financial adviser in your area. They will direct you to an adviser who is ‘independent’ (i.e. not in the pay of the big banks) and will therefore have no interest in putting you into the bank’s own investment products.