Retirement brings many exciting possibilities with it. You could be doing so much with your life after putting so much into your career. Some people travel, while others take up the hobbies they’ve been meaning to dabble in. Whatever you choose to do, retirement should be a time to relax as you step away from a job you’ve given your life to. But where to start with retirement planning?
Retirement planning takes a lot of careful attention and advice from a qualified financial adviser. If you’re considering retirement, there are issues you need to think about and plan for before you take the plunge. Consider these three issues that retirees face in retirement:
1: Having a Re-Contribution Strategy
Few retirees have ever heard of a ‘re-contribution strategy’, but you need to know what it is and how to use it if you retire. Your superannuation fund has both taxable and tax-exempt components. A re-contribution strategy is when you withdraw your money from your superannuation fund and put it back, i.e. re-contribute it back into your fund.
Contributing some or all of your withdrawn tax-free funds back into superannuation as a non-concessional contribution increases the level of non-taxable funds in your account. This reduces the tax payable on your superannuation pension when you withdraw it before the age of 60 (but after you have reached your preservation age). Re-contributing can also reduce the tax payable on benefits paid out to beneficiaries following your death.
Speak to your Financial Adviser to find out if a re-contribution strategy is suitable for you.
2: Dictating How Your Superannuation Death Funds Are Distributed
Many retirees often forget to make death benefit nominations, leaving all or part of their superannuation to their families. There are four kinds of death benefit nominations:
- You can make a binding death benefit nomination while you are alive, and this is where you write down how you want your superannuation death benefits distributed. These nominations typically expire after a set period of time.
- You can choose to name a reversionary beneficiary to receive payments from your income stream after you die.
- You can make a non-binding death benefit nomination that describes the general direction for how you wish some or all of your superannuation death benefits to be distributed following your death.
- Lastly, you can make a non-lapsing binding death benefit nomination directing your superannuation trustee to distribute some or all of your superannuation death benefits under the conditions described in the direction. If allowed by the trust deed of your fund, this nomination remains in place unless you cancel or replace it with a fresh nomination.
If you don’t specify what you would like to happen in regards to your superannuation death benefits, the trustee of your fund has discretion as to who should receive your death benefit.
3: Ensuring Your Money Will Last
Australia’s social security system is means-tested. It is supposed to act as a safety net, so the more money you have in assets or income, the less of an Age Pension you will get. For every $1,000 of assets above the allowable Age Pension threshold, your pension will decrease by $3. The more money your Age Pension funds your living expenses, the less you have to draw from your retirement savings to ensure you have enough money to last.
It is important to structure your income and assets in a way that:
- Generates sufficient returns for the duration of your retirement
- Reflects your risk appetite
- Maximises your government entitlements and subsidies
We hope this article proves to be useful for helping you better prepare for retirement. As you can see, planning for your retirement can be quite complex. With the above information as a foundation, you understand how the various legislative frameworks work. However, if you want to know more about your personal situation and retirement needs, we suggest that you work with a professional financial adviser.
Central Coast Financial Planning Group is a team of experienced financial advisers here to help individuals make better financial decisions and get retirement ready! If you are looking for financial advice on the Central Coast to grow your wealth and prepare for retirement, reach out to us today!
DISCLAIMER: The views expressed in this publication are solely those of the author; they are not reflective or indicative of RI Advice Group’s position and are not to be attributed to RI Advice Group. They cannot be reproduced in any form without the express written consent of the author. This information (including taxation) is general in nature and does not consider your individual circumstances or needs. Do not act until you seek professional advice. Newcastle Financial Planning Group, Central Coast Financial Planning Group, Sydney Wealth Advisers, Coastal Advice Port Macquarie and Coastal Advice Ballina Byron are subsidiaries of Coastal Advice Group Pty Ltd which is a Corporate Authorised Representative of RI Advice Group Pty Ltd, ABN 23 001 774 125 AFSL 238429.