How do I grow and maximise my nest egg? What strategies do I need to retire comfortably?
Whether you’re retiring soon or you have another decade to go, you want to be ready when the time arrives because, let’s face it, money is a significant part of a happy retirement. Green Associates delivers you the ultimate guide to retiring wealthy, giving you peace of mind that your future is secure.
How Much Do I Need To Retire?
The Association of Superannuation Funds of Australia (ASFA) reports that a single person (aged 65) who is a homeowner, requires an annual income of $28,514 for a modest retirement lifestyle and $44,188 for a comfortable lifestyle. For a couple (around 65 years of age), the figures rise to $41,170 and $63,35
The Association of Superannuation Funds of Australia (ASFA) reports that a single person (aged 65) who is a homeowner, requires an annual income of $28,514 for a modest retirement lifestyle and $44,188 for a comfortable lifestyle. For a couple (around 65 years of age), the figures rise to $41,170 and $63,35
Secret No. 1: Superannuation Sheltering
The benefits of ‘super splitting’ can be immensely powerful around retirement, especially if one partner is still a few years off reaching the Age Pension (up to age 67). Essentially, one partner’s assets are transferred and ‘sheltered’ during Centrelink’s assessment, under the younger spouse’s super accumulation phase, until they hit the age of 67.
Assets that may preclude them from receiving any old age pension (eg. a term deposit) can be legally contributed as a non-concessional contribution to superannuation in the younger partner’s name, potentially enabling the older partner to qualify for a part pension.
Using the ‘bring forward provisions’ could allow one individual to move up to $330,000 into their younger spouse’s super account. That $330,000 from an assessable environment, is now in the younger spouse’s exempt super account, which could increase the older spouse’s Age Pension by up to $11,700 per year, under the assets test, until the younger spouse reaches Age Pension age
Secret No. 2: Avoid death tax
As superannuation assets and individual balances continue to grow, more Australian families might receive a rude shock after the death of a family member in the form of up to a 17% tax bill on a portion of the deceased’s superannuation benefits. In some rare cases, a tax of 32% could even be levied.
The death tax is a direct tax payable on the taxable portion of a deceased’s super income stream products or account-based pensions. The tax is usually inflicted on their non-dependents and chances are, a large proportion of most balances are classified as taxable, due to concessional contributions (including contributions made from employment). A tax of up to 32% means an instant loss of $160,000 on a superannuation balance of $500,000!
The death tax can be avoided with a re-contribution strategy and can be used to gradually convert a member balance from taxable to tax free. The strategy involves the withdrawing of money from superannuation and depositing it back in as an after-tax, non-concessional, contribution
Secret No. 3: Super is easier than it has ever been
Today, it is easier than ever to get money into Superannuation. With the concessional cap increasing to $27,500 this financial year, this means you have the ability to catch up if you did not fully use this opportunity in previous years. The main advantage of topping up your superannuation is that you will be saving in a concessionally-taxed environment. At present, the tax paid in respect of superannuation is less than that paid in non-superannuation alternatives, and simply means higher net returns for your super.
The non-concessional cap has also increased to $110,000 or $330,000 using the bring-forward method.
Secret No. 4: Home downsizer
Downsizer contributions provide a great way to super charge contributions to your super while making lifestyle changes to boost your retirement. If you are aged 65 or over and are looking to boost your retirement savings, you may be able to make a tax-free contribution to your super of up to $300,000* beyond your other caps, using the proceeds from the sale of your main residence.
There are no work test or upper age limits that apply to the downsizer contributions, and the contributions are not subject to the $1.7 million total super balance restriction. The best thing is, both members of a couple can take advantage which means that up to $600,000 per couple can be contributed toward super.
*Criteria and conditions apply
Secret No. 5: Tax-free income stream in retirement
Account-based pensions allow retirees to receive tax free income in retirement. This provides you with regular payments into your bank account from your super savings.
This income is outside the PAYG system which means you can take full advantage of the tax-free threshold with other income-producing assets such as property and “ordinary” (non-super) investments.
Interested in finding out more? Speak to one of our team on 1300 815 921 or at info@greenassociates.com.au
At Green Associates, all of our advisers are fully licensed and listed on the ASIC Moneysmart Financial Adviser Register. Green Associates is committed to providing the best solutions for you and your wealth-creation journey.
