Planning for your retirement is essential. Like most plans, the longer the timeframe, the more chance of a favourable outcome. Retirement planning is no exception.
Some of the things you need to consider include:
- At what age do I want to cease work?
- Is there anything I can do now to help prepare for retirement? Any strategies that I could put in to place now?
- What is that I want to do when I retire?
- How much money will I need? What expenses will I have? Are they different from now?
- When can I access my super? Do I have to take it out and invest it once I retire or am I able to draw a regular income from my super?
- How long will my super last?
- Will I be eligible for any government benefits?
Being able to answer these questions before you make the decision to retire will ensure you can enter the next phase of life with confidence rather than trepidation. However it is never too late and if you have already retired there are still options available to you.
Case Study: Combined Salary Sacrifice & Transition to Retirement Pension
Leonard is 61 and still working. He plans on working till he is 67. He earns $110,000 and has $230,000 in Super. He wants to maximise his retirement savings in the 6 years he has left of working and has sought advice about the best way to do this.
After discussions with Leonard he has advised that he is happy to consider salary sacrifice to super but he does not have a lot of surplus cash and therefore wonders how he can afford to do so. As Leonard is over 50 his maximum concessional contribution limit to Super is $35,000 per annum. Based on his current Salary he has a little over $24,000 remaining after his employer makes his Super Guarantee (SG) contributions. Our recommendation to Leonard is to commence a combined Salary Sacrifice and Transition to Retirement (TTR) Pension strategy. The table below shows the results Leonard is able to achieve, all while continuing to take home the same net pay.
|Super Balance (Closing)||380,018||205,819||-174,199|
|TTR Balance (Closing)||227,495||227,495|
|Total Retirement Wealth||380,018||433,314||53,296|
|Income Tax Paid||205,177||150,926||-54,251|
|Contributions Tax Paid||10,139||31,005||20,866|
|Total Tax Paid||215,316||181,931||-33,385|
|Total Average Contributions (pa)||0||23,184||23,184|
|Average TTR Income (pa)||14,142||14,142|
|Average Tax Paid (pa)||35,886||30,322||-5,564|
|> Average Income Tax Paid (pa)||34,196||25,154||-9,042|
|> Average Contributions Tax Paid (pa)||1,690||5,167||3,478|
|Average Net Take Home Pay (pa)||84,391||84,391||0|
As you can see, even though Leonard has only 6 years until he plans to retire and he does not have surplus funds to invest, through some careful planning we are able to grow Leonards retirement wealth by a little over $53,000.
Vue Financial is here to help. We can answer these and many other questions and provide assistance in putting together a plan to embark on your next steps.