- Pre-Retirement - Can you afford to retire?
- Retirement - Am I making the most of my retirement funds?
- Building Wealth - The importance of planning
Pre-Retirement - Can you afford to retire?
The decision to retire permanently largely depends on whether you have the financial resources available to last you in retirement.
Working out whether you have sufficient funds to meet your retirement goals is an important part of pre-retirement planning. We assist you with this by:
- Providing living in retirements calculations to determine if you are ready to retire
- Implementing strategies to boost your retirement funds including-
- Working part time and accessing your super at the same time
- Building your superannuation balance whilst saving you on tax
- Claiming personal tax deductions
- Contributing to your super for tax saving purposes
Retirement - Am I making the most of my retirement funds?
If you have retired or are approaching retirement, it is still important to have a sound financial plan in place. Strategies such as converting your superannuation into a pension can be very tax effective and you should also know what aged pension payments are available to you to assist in your retirement funding.
We can assist with strategies such as:
- If you are age 60 and over, you don’t have to pay any lump sum tax or tax on pension income payments if you convert your superannuation to a pension plan
- If you are age 55 and under age 60, you automatically receive a 15% tax offset.
- Tax savings on investment earnings inside pensions.
- Applying for the aged pension and Seniors Card
Building Wealth - The importance of planning
It can be easy to under estimate the power of long term savings plans. The earlier you start the better your outcome will be.
We can assist with strategies such as:
- Budgeting - Pay yourself first. We assist with determining the income you need to meet your goals and then automate it.
- Reinvest the investment returns – the power of compounding and dollar cost averaging.
- Receive automatic rates of return – speed up the process with strategies to save more, earn more, reduce fees, improve performance.
- Know what your money is doing – The critical importance of Asset Allocation and rebalancing
- The automatic money system – create a life time income plan
- Financial competence – intelligence, responsibility and wealth protection
- Debt reduction – cut years off your loans with the debt terminator strategy
Transition to retirement strategy case study
The freedom that comes with no longer having to go to work is something we all look forward to. It’s the freedom to sleep in, spend time with your family, or take that long-awaited holiday. It’s volunteering in your local community, taking up a hobby, or simply having time on your side.
Peter is 61 and is looking forward to retiring in a few years. He’s worked hard to boost his super savings now so when he retires at 65 he and his wife Sue can take a long-awaited holiday overseas.
Earning a before-tax salary of $85,000, Peter has decided to reduce his income to $60,000 and salary sacrifice $25,000 per year to his super fund to prepare for retirement. He’s also decided to access 5% of his current super balance under ‘transition to retirement’ rules to supplement his income.
The benefits of this strategy for Peter are two-fold. By dropping his taxable income to $60,000 he reduces his marginal tax rate (including Medicare levy) from 39% to 34.5%. By accessing the transition to retirement program, he can then withdraw $20,000 from his existing super balance which boosts his annual take-home pay to $67,750 per year. And because he’s over 60, that additional $20,000 is tax-free.
Superannuation is likely to be one of the biggest assets most of us will ever have. Which is why taking care of it throughout your life is so important. And making extra contributions to your super is a great way to start.
Peter is a great example of this: when he turns 65, he will have $50,650 more in his super account than he would have otherwise. So they’re both looking at spending an extra couple of weeks in Tuscany!1
1This example is for illustrative purposes only. Calculations do not include rebates and tax offsets. Projections are estimates only and are not guaranteed. Actual figures and rates may differ significantly from the assumptions used. The example is based on annual tax rates as at 2014/15 (including Medicare levy) and assumes an inflation rate of 2.5% per annum, investment earnings of 8% per annum before fees and taxes, a concessional contributions tax of 15%, Superannuation Guarantee contributions of 9.5% per annum and a 5% income stream based on a super balance of $400,000.This example does not take into account movements in investment markets and the fees and costs charged by a super fund. You should consider whether you should get advice from a licensed financial adviser.
Learn about retirement
Planning for retirement
Most of us expect to retire one day, yet few of us really think how retirement will affect our financial security and lifestyle – which is surprising given we spend up to a third of our lives retired.
It pays to put plans in place so you can live the lifestyle you want. With careful planning your retirement should include some of the best years of your life.
Once you’ve estimated how much money you need in retirement you will need to start putting in place strategies to help you reach your target.
You’re about to retire
If retirement is just around the corner for you, you’ll probably want to consider more stable investment options.
Fixed interest investments may provide you with the security you desire or agreed investment returns.
It’s also worth evaluating the options open to you via your superannuation.
You may want to use your super to start an income stream, rather than take a cash lump sum.
This is because:
- no tax will be payable on earnings within the pension phase (compared to up to 15% in the accumulation phase),if you are over 60¹:
- your income stream payments will be tax free², and
- you don’t have to include the income payments in your annual tax return, which could reduce the tax payable on your non-super investments.
These tax benefits may enable you to receive a more tax-effective income to meet your living expenses, particularly if your super benefit is quite large and/or you receive income from non-super investments.
PLUS don’t forget to explore any Centrelink payments you may be eligible for.
With recent changes to Centrelink’s assets test (for the age pension) you’ll now lose only $1.50 in pension entitlements (rather than $3) for every $1,000 you exceed the prescribed assets limit.
You hope to retire in five years
If you’re planning to retire from full-time work in around five years, it may be worth considering a mix of investments across local and international shares, property, fixed interest and cash.
You may also wish to contribute additional funds to your superannuation, or even take advantage of transition to retirement strategies. If you’re over 55 you can choose to take advantage of transition to retirement strategies. This may allow you to cut your working hours but maintain your income level by taking a regular income stream from your superannuation.
For more information regarding your contributions to super see the learn about Superannuation section.
Retirement is five years or more away
With your retirement still some time away, you have the luxury to consider investment in higher risk options, including the share market where length of time in the market is important.
You may wish to discuss your options with your financial planner. When you work with a financial planner they’ll measure and consider the level of risk you are comfortable with and recommend an appropriate investment strategy.
¹ If you’ve reached your preservation age and are less than 60 years old, the taxable part of your income stream will be taxed at your marginal tax rate. If your income stream is paid from a taxed source, you will also receive a tax offset equal to 15% of the taxable part of the income stream.
² Where income is paid from a taxed super source e.g. public offer superannuation fund.
Over 11 years of expert experience in empowering clients to secure their financial future
Manage over $10million of retirement savings
Helped over 250 clients achieve their financial goals
Protected over 100 families with Income Protection and insurance plans
Certified Financial Adviser with RIAA