Whether you are considering retirement, being made redundant, taking early retirement or simply looking at ways to boost your retirement assets, it is a good idea to seek expert advice to ensure you are maximising your savings and assets in a tax effective way. There are many things to consider when planning for retirement such as; the lifestyle you desire, where you want to live, how much income you will need and the best way to transition to retirement. That’s why it is essential to make smart decisions and plan ahead to ensure you are prepared.
Things to Consider
As retirement draws nearer and dependent children leave home many people think about moving homes for lifestyle reasons, for example, to be closer to the beach. This is a major decision and needs to be carefully considered. In terms of lifestyle things that need to be considered include accessibility to family and friends, access to services like healthcare and transport.
From a financial viewpoint it may be possible to free up substantial capital by downsizing or moving to a less expensive area. If this money is invested into superannuation prior to stopping work altogether it could have significant tax advantages.
What are your plans for work?
How long you can or wish to work is up to you. The longer you work the less you will need to draw on your savings and the more you can accumulate to fund your retirement. But this doesn’t necessarily mean working flat out until you retire. It may mean gradually phasing down from full-time to part-time work. It can also be an opportunity to focus on the sort of work that interests you and is perhaps less demanding.
If you have already established a substantial asset base, simply earning enough to live on for a few more years will greatly boost your financial position in retirement as it will delay the need to draw on your nest egg and allow more time for it to grow. You may also wish to consider a transition to retirement strategy to boost your super.
When is the best time to retire?
There is no legislated retirement age. However, you can only access your preserved super from age 55 if you were born before 1 July 1960, increasing in yearly increments to age 60 for those born on or after 1 July 1964. The government pension is currently accessible from age 65 for men and 64 for women, but this will gradually increase to age 67 for both sexes for people born in 1957 or later.
There are broadly two ways to approach planning for retirement. You can decide when you wish to retire and work out how you will fund it from your accumulated assets, or work out how much you will need to retire on and plan your retirement around that target.
How much do you need to retire?
As a rough guide, depending on your investment strategy, you would need at least 12 times the amount of your required annual income to ensure you can maintain that income for the rest of your life. That is, if you wanted an after-tax income of $50,000 for the rest of your life you would need around $600,000.
Retirement Funding Gap Analysis – recommended
At Select Advice Financial Planning, we assess our clients’ retirement goals and needs by undertaking a comprehensive ‘retirement needs analysis’. This analysis will educate and guide clients on how much they will need in superannuation and other assets to meet their lifestyle and financial needs in retirement. This process is highly recommended for all clients seeking guidance on planning for a financially secure retirement.
Boosting super in the lead up to retirement
Superannuation’s tax concessions on contributions and earnings, and the ability to draw tax free income from the age of 60, mean it is the ideal way for most people to fund their retirement. Anyone under age 65 can contribute to super and people aged between 65 and 74 can contribute as long as they have worked at least 40 hours in a 30 day period during a financial year. We can also assist you with other tips on how to boost your super savings.
If you have other investment assets outside of super, such as an investment property, careful consideration needs to be given to how they work together to protect capital, minimise tax and generate income in retirement.
Self-Managed Super Funds (SMSF)
Having your own SMSF fund allows you to control your own super for you and your family, how it is invested and the pension payments made during retirement. For example your fund can hold assets such as direct property investments and choose when to buy and sell assets to minimise tax.
A pension from a SMSF has to comply with the same basic rules as any other fund. However, the pension component has to be structured separately. Managing your own fund carries substantial legal and reporting responsibilities, so it’s important to seek financial advice about managing a SMSF during retirement.
To seek advice about your superannuation needs, discuss smart superannuation strategies or for more detailed information on any of the topics discussed in this section, please contact us today and we will make a an appointment to assist you take control of your superannuation and retirement plans.