Is your super working as hard as you do?
Retirement may still seem like a distant dream, but if you are between the age of 55 and 60 you may be able to take advantage of a Transition to Retirement strategy. Based on your superannuation, these strategies provide flexible options that work around the way you want to work in the years ahead as you move closer towards retirement. Let’s talk.
Is your super working as hard as you do?
Transition to Retirement has been designed to allow workers to take smaller steps as they step away from the workplace into retirement. Previously, super couldn’t be accessed until the age of 65 or retirement after preservation age. The current legislation provides several options that give you the flexibility to use your super as a valuable tool to plan and live the life you want now and when you ultimately retire.
Let's look at your options
Perhaps you’d like to work fewer hours but keep building your super nest egg? Maybe you want to access some of your super to top up your income now? Or perhaps you want to stay working just the way you are and keep building your super balance? The worker-saver option could help you do that and could give you some super pre-retirement tax savings too.
Worker – Saver
OBJECTIVES Keep working, keep
building your nest egg and access
some super too.
I love my job and want to keep
working, but I’d like to give my
super savings a boost in the
Moving to part-time work isn’t for
everybody or maybe it’s a step you
can’t afford just yet. The worker – saver
option is suitable for you if you want to
keep working the same hours but take
advantage of tax-effective strategies
to keep building your super balance.
OBJECTIVES Work less and use super
to boost your everyday income.
I’ve worked hard. So now I have met my preservation age, I want to work a little less. But I still want to have enough money coming in to enjoy my lifestyle.
This option could be a great solution for you if you still love your work but want to wind back your days to start enjoying your own pursuits. This strategy lets you top up your reduced salary with a non-commutable income stream from your accumulated super benefit.
OBJECTIVES Work any hours and access some super for additional income plus associated benefits.
What I really need is the flexibility to work how I want and still have the freedom to access the benefits of super.
This option may be right for you if you want to maintain flexibility in the hours that you can work. It also involves drawing a non-commutable income stream from your super while using a range of strategies to continue to build your investments, access the benefits associated with super, or both.
How your Transition to Retirement could work
Worker - Saver
Mark continues full-time work with a flexible super strategy
With this strategy, Mark may be able to take advantage of the favourable tax treatment of super to
keep building his nest egg and have more to look forward to in retirement. While still working full time,
Mark can take advantage of salary sacrifice to keep building his super. Salary sacrificed contributions
are taxed at 15% while super fund earnings are taxed at a maximum of 15%. These rates compare
favourably with his regular marginal tax rate of 32.5%. If Mark decides to start receiving regular
payments through a non-commutable Transition to Retirement allocated pension from his super, he
may be eligible for up to a 15% tax offset on that income, effectively reducing the tax on that portion
of his income from 32.5% to 15%. Overall tax savings could help Mark grow his retirement savings.
Mark works part time and uses super to top up his income
With this scenario, Mark could reduce his days at work yet keep his cash flow almost the same while still contributing to his super. Moving from full-time employment to working 25 hours a week, Mark’s salary reduces to $53,500 while his employer-paid superannuation guarantee contributions reduce to $5,083. With his current super balance at $290,000, Mark is in the position to start receiving an allocated pension between $11,600 and $29,000 per annum. Mark chooses to receive $17,494 per annum. On his previous salary of $75,000, Mark’s take-home pay was $57,578. Now working 25 hours a week and with his allocated pension paying $17,494, his annual take-home pay remains at $57,578.
Worker - Saver
Mark keeps working and uses super to build his investments for the future
Under this scenario, Mark could lift his overall income and use additional funds to invest, for example, in a country property for his future retirement. While still working full-time, Mark uses his super to start a non-commutable allocated pension of $17,494 per annum. On top of his salary, this gives Mark more income than he needs, but as outlined above, will be eligible for favourable tax offsets. Mark could choose to use his extra income to build his assets outside of super. Current Transition to Retirement rules mean Mark may be able to take out a loan to buy his dream home in the country and use the extra income to make the loan repayments until he retires. Up until now, Mark would probably have needed to sell his current home to fund the purchase. Now he can get a head start on retirement with plans to pay out the country house loan when he sells his current home when he retires. Mark could also choose to build investments in other assets such as shares.
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Infocus Securities Australia Pty Ltd ABN 47 097 797 049 AFSL and Australian Credit License No. 236523. This information is of a general nature only and neither represents nor is intended to be specific advice on any particular matter. Infocus Securities Australia Pty Ltd strongly suggests that no person should act specifically on the basis of the information contained herein but should seek appropriate professional advice based upon their own personal circumstances. Although we consider the sources for this material reliable, no warranty is given and no liability is accepted for any statement or opinion or for any error or omission.
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