Retiring Soon Or Already Retired?

You’ve probably already started to think about what you would like to do in retirement – take that overseas holiday, learn a new hobby, spend more time with the grandkids. But have you thought about how this might be funded, and how long your money will last?

The Australian Super Fund Association (ASFA) Retirement Standard benchmarks the annual budget needed by Australians to fund either a comfortable or modest standard of living in the post-work years. The most recent national figures released for the ASFA Retirement Standard show that, in general, a couple looking to achieve a comfortable retirement needs $59,236 per year, while those seeking a ‘modest’ retirement lifestyle need $34,226 per year.

Budgets for various households and living standards (Dec Quarter 2015)
Retirment Lifestyle Figures

The figures in each case assume that the retiree(s) own their own home and relate to expenditure by the household. This can be greater than household income after income tax where there is a drawdown on capital over the period of retirement. Single calculations are based on female figures.

Modest retirement lifestyle is better than the Age Pension, but still only able to afford fairly basic activities. A Comfortable retirement lifestyle enables an older, healthy retiree to be involved in a broad range of leisure and recreational activities and to have a good standard of living through the purchase of such things as; household goods, private health insurance, a reasonable car, good clothes, a range of electronic equipment, and domestic and occasionally international holiday travel.

Your employers Super Guarantee contributions

For many of us, our employer’s Super Guarantee (SG) contributions will only go so far in retirement.

Depending on your retirement goals and current age, your SG contributions may not be enough to fund your lifestyle in retirement.

Currently, all employers are contributing 9.5% of their employee’s gross income into super. However, it is unlikely this amount only would be enough for anyone as their sole source of retirement income.

Country Wide Wealth can help you figure out how much you will need to retire comfortably and can help you look at using your super in helping to tackle what can be a daunting problem for many.

Making the transition to retirement

You no longer have to retire on the day you turn 65. The day you stop working is now in your hands.

By using a Transition To Retirement (TTR) strategy you can take control of your retirement date, prolong your retirement or use it to turn a redundancy into a time of opportunity.

A majority of pre-retirees would like to make a gradual transition to retirement. Many others are simply looking for ways to ramp up their superannuation before retirement. And the financially astute are always looking for tax-effective strategies.

Using a TTR strategy can help you meet these objectives without reducing your income. The term may sound complicated, but it’s a lot easier than you think.

A TTR involves using your super and a pension to provide income, whilst salary sacrificing into your super. It’s a very effective way to increase your super, and can be used to maintain your net income and reduce your work hours.

To use a TTR strategy you need to have reached your preservation age. It involves rolling some or all of your superannuation into an eligible income stream ie an account-based pension or annuity. You then draw down your required amount, and organise with your employer to salary sacrifice as much as you need into your super making sure you still have enough money to live on, and are under the concessional contributions cap.

As an added bonus, while your income is taxed at your marginal tax rate, pre-tax contributions into your super are taxed 15% and interest earnings in super are taxed up to 15%. Money withdrawn from an income stream for people aged 55 to 59 may be partly tax-free and will also attract a 15% tax offset. For people over age 60, it’s tax free!

A TTR strategy can make a significant difference to your super without reducing your take-home pay.

Choosing the Good Life

Sorting out your finances is just one consideration when preparing for retirement. Other areas that need attention are your health, your relationships and your activities.

A workshop on Choosing the Good Life to help set you on the right path for planning a healthy ( and wealthy) retirement. We typically run this workshop yearly.

It explores the four essential factors that contribute to a happy and active retirement – health, finance, relationships and activities, and can be not only educational and enlightening but also is a sure relationship saver as it will help to align your goals with that of your partner.

For more information on this workshop, see our Seminars and Workshops section.

Retired already?

At Country Wide Wealth we take a holistic view on your retirement by combining your financial requirements with those of your lifestyle.

It’s important to look at issues such as minimising tax implications, and other ways to make your money last by looking at the right investment options for you, structuring your finances to maximise pension payments and manage any debt.