There is no magic figure that shows how much all of us need in retirement. The important thing is to understand the sort of retirement lifestyle you hope to enjoy and determine how much annual income you might need to fund this goal.
One strategy that can give you a good idea of your desired retirement income is to write up a retirement budget. It can show how much income you will need but also let you fine-tune your ideal lifestyle if it looks like you may need to scale back your plans.
It’s often only when we are approaching retirement that the reality of the financial side of things becomes completely clear. Unless you plan to rely solely on the age pension (which only provides for a very basic lifestyle), it may be worth looking at ways to boost your retirement savings in your final working years.
There are a number of ways to do this.
For starters, you may be able to increase your pre-tax super contributions. You may like to talk to your employer about making contributions via salary sacrifice. This is where part of your pre-tax wage or salary is directed to super instead of being paid directly to you.
Or you may be able to make a contribution out of your own pocket. Super savings are only taxed at 15%, but be aware of the contribution caps.1
If you have a spouse or partner, it may be worth making a contribution to his or her fund.
Be aware, annual limits on super contributions do apply. Your BT Adviser can explain these limits.
Now is also the time to review your super fund to check that your nominated investment strategy is in line with your tolerance for risk.
Many pre-retirees are tempted to shift their super into low risk, conservative options, but bear in mind you could have 20 or even 30 years of living ahead. It could pay to have at least part of your retirement savings, including super, invested in growth assets that could generate long term capital gains. You can explore these options with your BT financial adviser.
Another option to consider is using part of your super to purchase a transition to retirement pension. When combined with salary sacrifice super contributions, these pensions may help you increase your super while making up the balance of your take home pay with an income stream from your fund.
If you still have money owing on your home loan, you may be wondering whether it is better to use any spare cash to pay down this debt or add the money to your super. It is a good idea to speak to your financial adviser, who would be able to advise of the best option for your circumstances and the economic climate.
You may have plans to give your adult children or grandchildren a financial helping hand when you are retired. Just be sure you have sufficient funds in place to secure your own lifestyle first before offering financial assistance.
A self-managed super fund (SMSF) can have real pluses, allowing you to have complete control over how your super is invested (within Tax Office guidelines).
Your financial adviser can explain if a SMSF is right for your circumstances. Managing your own retirement savings is a significant responsibility – and one that comes with costs of its own.
In addition to determining if you have sufficient capital for a SMSF to be worthwhile, consider whether you really want the added responsibility.
Along with your superannuation, it is a good idea to grow your investments outside of super. This may give you a diversified pool of funds to draw on as well as providing some protection against any unexpected legislative changes to super.
Downsizing to a smaller property could offer the benefit of a lower maintenance home, an opportunity to be closer to family and a way to access any potential home equity.
It is worth crunching the numbers to be sure downsizing puts you in front financially. The upfront purchase costs, notably stamp duty, on your new home can take a bite out of your available cash.
There may be other options worth looking at, such as a reverse mortgage, which allows you to harness any home equity you may have without the need to sell a much loved family home.
Take a look at Downsizing for more details.
1Tax on contributions – ATO website - https://www.ato.gov.au/individuals/super/super-and-tax/tax-on-contributions/
This information is current as at 15/08/2016.
This information has been prepared without taking account of your objectives, financial situation or needs. Because of this you should, before acting on this information, consider its appropriateness, having regard to your objectives, financial situation and needs.
This information provides an overview or summary only and it should not be considered a comprehensive statement on any matter or relied upon as such.
Before requesting a super transfer, we recommend that you check with your other funds to see if there are any exit fees for moving your benefit or other loss of benefits such as insurance. We also recommend you to check with tax professionals to see if there are any tax implications.
Generally, contributions to a superannuation fund are preserved. The government has placed restrictions on when you can access your preserved benefits. In general, benefits will not be able to be paid until a member is age 65, or has permanently retired and is above his/ her preservation age (i.e. 55 years up to 60 years depending on when the member was born).
The Government has set caps on the amount of money you can add to superannuation each year on a concessionally taxed basis. Currently the cap is $30,000 per person pa for the 2016/17 financial year. If you are aged 49 or over on 30 June 2016, the annual cap is $35,000.
In addition, the government has set a non-concessional contributions cap. The cap is $180,000 per person pa. Those under age 65 can ‘bring forward’ two years’ worth of personal contributions, allowing them to contribute up to $540,000 per person over a three year period. However, in the Federal Budget announced on 3 May 2016, the government proposed to introduce a lifetime cap of $500,000 on non-concessional contributions, which would include non-concessional made since 1 July 2007. For more detail, speak with a financial adviser or visit the ATO website.
The tax position described is a general statement and is for guidance only. It has not been prepared by a registered tax agent. It does not constitute tax advice and is based on current tax laws and our interpretation. Your individual situation may differ and you should seek independent professional tax advice.
This Information may contain material provided directly by third parties and is given in good faith and has been derived from sources believed to be accurate at its issue date. It should not be considered a comprehensive statement on any matter nor relied upon as such. While such material is published with necessary permission, no company in the Westpac Group accepts responsibility for the accuracy or completeness of, or endorses any such material. Except where contrary to law, we intend by this notice to exclude liability for this material.
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