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Basics of retirement

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Retirement is a milestone marking the start of a new phase in your life. If you’re well-prepared, you can look forward to freedom from a set routine and the opportunity to enjoy many things you haven’t had time to do while working.

Your quality of life and financial security after work will depend on you having an adequate retirement income. The decisions you make now about how you will invest your superannuation and any other savings once you retire are of critical importance. Whether you intend to move into full retirement straight away, or scale down to part-time work first, there are many issues to consider before you make any changes.

Planning ahead

In the lead-up to your retirement, information and advice are crucial in helping you assess your situation, identify your retirement goals, and develop a practical, achievable plan. This is where MI Financial Solutions Pty Ltd can help.

Superannuation is highly favourable for retirees, who may want to consider making the most of the tax concessions and flexible rules that are now available. For example, under the transition to retirement legislation, once you reach age 55 to 60 – depending on your year of birth – you can access some of your super money through a pre-retirement pension while you continue to work full time or scale down to part-time employment.

What you need to consider

When planning your retirement, areas to think about include:

  • When you want to, or are likely to, retire
  • Whether you want to retire completely or scale down to part-time work How much super you have
  • How much income you will need
  • How long your money will last based on your life expectancy
  • What you want to do and achieve in retirement.

A regular income and big tax advantages

When you retire, it’s important to know that you have a reliable, regular income. The most popular and tax-effective way to arrange a regular income stream is through an allocated pension or annuity. This is because:

  • If you’re 60 or over, lump sum or pension income payments are completely tax-free*
  • If you’re over 55 and under 60, you will receive a 15% tax offset on pension income payments received as part of a transition to retirement strategy*
  • Earnings in the fund are tax-free.*

*applies to taxed funds only, ie. does not apply to untaxed funds such as the Commonwealth Super Scheme.

Control and flexibility

With an allocated pension or annuity, you can choose how much you want to receive as your regular income, provided you draw at least a set minimum (based on the value of your account balance). You can also withdraw lump sums at any time if you need to, but you can’t make additional contributions to your pension once it is set up.

If you choose to invest your money outside super, there is a wide range of investment options to choose from. A professional financial adviser can help you create a diversified portfolio designed to deliver the returns you need to achieve your goals. The income you receive is a combination of capital growth and earnings.

Centrelink benefits

For the majority of people, the Age Pension is considerably less money than they are used to living on. The amount of Age Pension you receive will depend on whether you are single or have a partner and your income and assets.

You may qualify for the Age Pension based on each of these criteria:

  • Your age, depending on when you were born
  • Meet certain residence requirements
  • Have income and assets below a certain amount.

A MI Financial Solutions Pty Ltd adviser can help you calculate how much Age Pension you will be entitled to receive given your particular circumstances.

Putting your affairs in order

A comprehensive retirement plan should include a review of your will and the details of how you’d like your estate to be distributed after your death. The right advice from a solicitor can avoid many common pitfalls that occur in family or business situations. It’s also important to seek advice on the tax implications of how your estate will be distributed, to make sure your beneficiaries receive all that you would like them to. We can refer you to appropriate legal and taxation professionals.

To find out how we can help you plan a successful retirement, call (02) 9522 2218 or email us