top of page

Which Is Better for Retirement: Lump Sum or Regular Income?

As you approach retirement, one of the most important decisions you'll need to make is how to access your superannuation. In Australia, there are generally two ways to access your super: as a lump sum or as regular income payments.

The choice you make can have a significant impact on your retirement lifestyle, tax obligations, and long-term financial security. In this article, we'll explore the pros and cons of each option and provide some guidance on which might be best for you.

Remember, it's always a good idea to consult with a financial consultant or financial planner before making any major decisions about your super.

Lump Sum and Regular Income Payments Explained

Before we dive into the pros and cons, let's first clarify what these options entail. If you choose to take your super as a lump sum, you will receive the entire superannuation account balance in one payment. Alternatively, if you opt for regular income payments, you will receive your super as a series of payments over an agreed-upon period, typically through an account-based pension or annuity.

Pros and Cons of Lump Sum Withdrawals

With a lump sum withdrawal, you have complete control over how you use your super funds. You can invest them in other assets, pay off debts, start a business or use them for any other purpose you see fit.

Taking out your super in a single payment allows you to have fast access to all your retirement savings, which can be beneficial in urgent situations or for making substantial acquisitions. However, you must also consider how you will sustain yourself if you have depleted all your retirement savings.

If you spend or invest your lump sum unwisely, you may be unable to cover your living expenses later in retirement. When considering taking a lump sum, it's important to also examine tax regulations.

In general, if you are over 60 years old, the funds you withdraw from your super will be tax-free.

Conversely, if you are under 60, you may have to pay taxes on that lump sum.

Additionally, if you decide to invest the money, the location of your investment may affect whether you are taxed on the interest earned or potentially the capital gain. The tax implications of taking your super as a lump sum will vary based on your specific situation.

Pros and Cons of Regular Income Payments

An account-based pension provides a regular income stream in retirement, similar to a salary. This can make it easier to budget and plan for your expenses, giving you a sense of financial security.

The Australian Government offers tax concessions on account-based pensions, which can result in lower overall taxes compared to lump sum withdrawals. If you transfer your super funds into an account-based pension, they will not be subject to the tax regulations that apply to money outside of super.

This means that your investment earnings within the fund will not be taxed. For individuals between their preservation age and 60 years old, the taxable part of the account-based pension will be taxed at their marginal income tax rate, with a 15% tax offset.

After turning 60, you will not be taxed on account-based pension payments. The tax effectiveness of an account-based pension will vary based on personal circumstances.

Unlike a lump sum withdrawal, an account-based pension restricts your access to your super balance. You can only access the funds through regular income payments, which may be a drawback if you need a large sum for an unexpected expense.

Moreover, your account-based pension balance remains invested in your super fund, which means it's subject to the ups and downs of the market. While this can potentially lead to growth over time, it also exposes you to investment risk.


Choosing between a lump sum withdrawal and regular superannuation income payments depends on your circumstances. A lump sum offers immediate access to funds but requires careful management, while regular income payments provide financial security and tax concessions but restrict access to your balance.

It's crucial to consult with a financial consultant or financial planner before making any decisions about your super to ensure that you make the best choice for your retirement.

At Swell Financial Planning, we serve as your dedicated financial consultant in Gold Coast, guiding you in crafting the ideal mix of investments to ensure a fulfilling retirement tailored to your desires. Feel free to contact us if you have any questions or concerns!


bottom of page