With the introduction of the $1.6 million transfer balance cap and related restrictions around contributions and the retention of death benefits inside superannuation, the question of whether you should also be looking to build wealth outside of super is becoming more widely-asked.
If retirement is something you are starting to think about, now is the time to put a plan together to ensure that you achieve the satisfying and meaningful retirement that you aspire to.
While the most enticing aspect of entering into retirement is the prospect of being free to do as you wish, it can be challenging to adjust to all that free time and to navigate the changes associated with leaving the workforce. It’s important you continue to fill your days with activities that give your life meaning and make you feel valued.
Maybe you have always wanted to pursue a certain hobby and never had the time. Whether it’s learning a language, picking up an instrument or unleashing your creative side, retirement can be the time to pursue your passions.
The other thing to remember is that you have a wealth of knowledge in your field, and it can be very satisfying to pay that forward. Why not consider volunteering a few days a week at an organization that might be in desperate need of your skillset or mentoring someone who is just starting out.
As you enter into retirement it’s important to keep in mind that old adage ‘move it or lose it’. In fact, by some estimates, lack of physical activity may be the cause of about half of the physical decline associated with ageing.i Aim to choose exercises that maintain muscle mass and flexibility as well as finding time a few times a week to get your heart rate up. Consider riding, swimming, strength training, yoga or even working on your golf game as good options.
Retirement often entails some big changes. Some people like to downsize, others seek a move away from the city’s hustle and bustle. In planning your next move, make sure that the area is adequately facilitated for your needs. Consider, for example, the proximity to medical services and importantly the rest of your family.
Funding your lifestyle
Everyone will have different aspirations when they retire. For some it will mean being able to travel and see the world. For others it will be enjoying time with the grandkids or pursuing projects they have always wanted to tackle. Whatever your goals, you want to be sure you have the money to fund the lifestyle you aspire to.
It might be worth considering a gradual approach to ease into retirement. Rather than leaving the workforce altogether, you may be able to reduce the hours you work. That way you still have some income coming in, and a staged approach to retirement can also help with the mental adjustment to leaving the daily grind behind.
Transition to retirement as a strategy
A ‘transition to retirement’ (TTR) income stream is a type of pension that allows you to access your super while you are still working. The idea is that as you wind back your hours, you subsidize your decreased earnings with a portion of your super.
To do this, you must have reached preservation age, between 55-60 depending on when you were born, and have started a super account-based pension.
The table below will assist you in working out your preservation age.
Date of birth
Before 1 July 1960
1 July 1960 – 30 June 1961
1 July 1961 – 30 June 1962
1 July 1962 – 30 June 1963
1 July 1963 – 30 June 1964
1 July 1964 and onwards
If you are younger than 65, you can draw down a pension income between 4% to 10% from your TTR account balance each year. You cannot withdraw a lump sum. When you are ready to stop work all together you can roll your TTR pension back into your super account.ii
While TTR pensions can help increase your flexibility and may have tax benefits while you’re still working, they do involve drawing on your retirement savings, therefore leaving less for when you retire. Further, they may not be beneficial in all circumstances, are subject to restrictions and can be complex, so it is best to speak with an adviser before making a decision.
Having a plan for how you ease into retirement is more important than ever. If you need help creating one, come have a chat with us to discuss your options.
Liberum Financial Pty Limited and its advisers are Authorised Representatives of Fortnum Private Wealth Pty Ltd ABN 54139889535 AFSL 357306 trading as Fortnum Financial Advisers This advice may not be suitable to you because it contains general advice that has not been tailored to your personal circumstances. Please seek personal financial advice prior to acting on this information. Investment Performance: Past performance is not a reliable guide to future returns as future returns may differ from and be more or less volatile than past returns.
The focus of this year’s budget was on reining in spending, cutting taxes for middle Australia and small to medium sized enterprises, and giving older Australians a bit of love.
The Government revealed a seven-year personal income tax plan for “lower, fairer and simpler taxes” with relief for low and middle income earners, starting 1 July 2018. The measures will also tackle bracket creep.
From 1 July 2018, the Government will provide a tax offset of up to $530 for tax payers in the 2018-19, through 2021-22 financial years.
Those earning up to $37,000 who currently face a 19 per cent tax rate will have their tax bill reduced by up to $200. These savings will increase incrementally between $37,000 and $48,000 to a maximum saving of $530 for those earning between $48,000 and $90,000. The benefit will then gradually reduce to zero at an income of just over $125,000.
Bracket creep measures will see the upper threshold of the 32.5% tax bracket increase from $87,000 to $90,000 from 1 July 2018 and to $120,000 from 1 July 2022. The Low Income Tax offset will also increase from $445 to $645 from 1 July 2022. This will be followed by a flatter personal tax system by 2024-25 where the 37 per cent tax bracket will be abolished completely. Australians earning more than $41,000 will then pay only 32.5 cents in the dollar all the way to the top marginal tax rate threshold that will be adjusted to $200,000.
The top marginal tax rate of 45 per cent will apply to incomes above $200,000.
Small to medium sized enterprises
Attention to small to medium sized enterprises was targeted at keeping them competitive globally. The Government extended the $20,000 instant asset write off for a further 12 months to 30 June 2019 for businesses with a turnover of up to $10 million.
Tax cuts for small business began in 2016-17 when companies with a turnover of less than $10 million had their tax rate cut to 27.5%. This rate was extended to companies with annual turnover less than $25 million in this financial year and from 1 July 2018 will be expanded to include companies with annual turnover less than $50 million.
The Government also announced tough new anti-phoenixing measures to stop businesses who deliberately go bust to avoid paying their bills and potentially affecting other businesses through their demise.
The focus on superannuation was on lost super and allowing Australians to build their super balances by saving unnecessary fees and unwanted insurance.
The ATO will be given powers to send lost super to people’s active super accounts. Fees on accounts with balances of less than $6,000 will be capped at 3 per cent and superannuation fund exit fees will be abolished for those wanting to switch funds.
For superannuation fund members aged under 25, they will need to opt in should they wish to have insurance within their super policies.
For SMSFs, the maximum number of members will increase from 4 to 6 people from 1 July 2019. This will allow for greater flexibility for larger families. In addition, the audit requirements for SMSFs will move from annually to three year periods for funds with a history of good record keeping and compliance.
For older Australians
The Pension Loans Scheme will be open to all Australians, including full rate pensioners and self-funded retirees to enable them to boost their retirement income by up to $17,800 pa for a couple, without affecting their eligibility for the pension or other benefits. An expanded Pension Work Bonus will allow pensioners to
earn an extra $1,300 a year without reducing their pension payments. This will also be extended to self-employed individuals who can now earn up to $7,800. People aged 65-74 with a total superannuation balance below $300,000 will now be exempted from the work test for voluntary contributions for the first year they would otherwise fail to meet the work test.
Aged care, skills training, Medicare and the PBS
For older Australians who would like the choice to remain in their homes and avoid residential aged care facilities, there will be a total of 74,000 high level home care places funded by 2021-22. A new Skills Training Incentive will provide mature aged workers with the opportunity to update their skills. And, employers will be incentivised with $10,000 wage subsidies for employing mature workers. Extra funding into Medicare and the PBS will see new medications being funded including those to treat spinal muscular atrophy, breast cancer, refractory multiple myeloma and relapsing-remitting multiple sclerosis and an HIV preventive drug.
General Advice Warning The information provided in this article is general in nature and does not take into account your particular investment objectives, financial situation or insurance needs; we therefore recommend you seek advice tailored to your individual circumstances before making any specific decisions.
Dobbrick Financial Services (Gympie) Pty Ltd ABN 48 931 205 109 & DFS Oakland ABN 64 340 527 395 and their advisers are authorised representatives of Fortnum Private Wealth Ltd ABN 54 139 889 535 AFSL 357306.
TIPPING an extra $50 per month into your superannuation fund can leave you with nearly $50,000 extra at retirement, new figures show.
Australians are being encouraged to skip sipping on daily takeaway coffees and buying their lunch as just a few ways to creating extra cashflow they can stash into their super savings and help fatten their balance.
Being aware of what fees you are paying, what superannuation you have in place and the current market conditions can be confusing. Having an appropriate financial plan in place and finding a financial adviser you feel comfortable with, can help you uncover opportunities and improve your financial future. Setting aside time to review your finances is one of the easiest ways to keep your plans on track. Let’s see how a financial adviser can help you get a head start in 2018.
Setting aside time to regularly review your finances is one of the easiest ways to keep your plans on track and work towards achieving your financial goals. Let’s see how you can take a look at your finances and make any necessary changes before the start of 2017.
With life being so busy it can be very easy to ignore your long-term financial plans, but we can’t stress enough, planning conversations today should be done early to create room for your future dreams.
So how can you make the most out of your personal or business situation?
‘Dare to dream’ and plan for the future – here are a few things to consider.