Retirement means starting a new chapter of your life, one that gives you the freedom to create your own story, as you decide how you would like to spend your time. While retirement may not be part of your immediate plans, there are advantages to giving some thought as to what retirement looks like for you and how to best position yourself, well before you leave the workforce behind.

A time of profound change:

Setting aside the financial implications of leaving a regular salary behind, retiring from work represents one of the biggest life changes you can experience.

What we do for a living often defines us to some extent and leaving your job can prove challenging in terms of how you perceive yourself, as well as how others view you. Coupled with the desire for financial security and the need to make retirement savings last the distance, many struggle with making sound financial decisions that will ensure their retirement is everything they hope it will be.

A partner on your retirement path:

Superannuation Advice Australia (SAA) has a dedicated Transition to Retirement (TTR) Team to guide and support you with financial strategies, that may help to:

  • Boost your retirement savings
  • Reduce tax
  • Maintain or supplement your income, should you decide to reduce your work hours

If you have reached your preservation age (between 55 and 60 years) and are still working, you could consider looking at a TTR strategy, to:

  • Supplement your income whilst reducing your work hours
  • Boost your Super and save on tax, while still working

Case Study: 

An example of a TTR strategy to boost Super and save tax – whilst retaining a similar take-home pay: 

Stewart wants to boost his superannuation as he heads towards retirement but can’t afford the drop in income each week. 

  • As Stewart can’t afford to make additional contributions into his Super due to cash flow – an ‘income swap’ strategy may be worth considering 
  • In this example, Stewart earns approximately $66,500 p.a. and is 60 years old. However, due to still having a mortgage, can’t afford to make extra contributions into his Super. By implementing an ‘income swap’ strategy, Stewart can boost his Super, particularly if done over a reasonable period of time. By salary sacrificing $20,000 p.a. on top of his Employer Super Guarantee payments of $7,000, this would allow Stewart to reach an overall level of contributions just below the concessional cap. These contributions would attract contributions tax of $3,000 (15%) within his Super fund. However, if this $20,000 was received as salary, it would attract income tax of approximately $6,500. By drawing an income of $13,500, this would allow Stewart to retain the same net pay he would have received, whilst boosting his Super by $3,500 (the difference between contribution tax and marginal tax applied) 

However, there are a number of rules to consider when evaluating which TTR strategy could work best for your individual financial situation, such as:

  • If you are age 60 or over, in most cases pension payments are tax free 
  • If you are younger than 60 years of age, the taxable portion of pension income will be taxed at your marginal tax rate, less a 15 percent tax offset 
  • Centrelink: Asset tests apply; and payments may be affected such as Jobseeker, or if you have an older spouse in receipt of a Disability Support Pension (DSP) or Aged Pension 
  • Minimum pension drawdown amount of 4 percent 
  • You may have Life insurance with your Super; check if your cover reduces or stops if you do decide to start a TTR pension 

Starting a TTR Income account can be complex. Thankfully, SAA’s TTR Team is only a call away. Our licenced Financial Advisers work with both pre- and post-retirees. We are able to review your individual circumstances, provide tailored financial advice, and recommend appropriate strategies that will work towards maximising your Super, as you transition into retirement.

With financial peace-of-mind, we want to ensure that your retirement is not only something to look forward to, but a wonderful new chapter of your life – where you’re enabled to live out your retirement dreams.

Published by Barton Peek, Financial Adviser

Information contained in this document is considered to be true and correct at time of publication. In addition, the information provided is general information only, and does not take into account any individuals’ objectives, financial situation and needs. Before acting on any information contained herein, you should consider the appropriateness of the advice having regard to your personal objectives, financial situation and needs.***