You may have heard of Transition to Retirement (TTR) strategies. They are a great way to boost your super savings while you’re still working. And with the end of the financial year fast approaching, now is the time to start making smarter decisions about your money.
If you already have a TTR strategy already, it's important that you refresh it each year. Now is an ideal time to do it.
Not many people do the sums, but if you look at research collected by The Association of Superannuation Funds of Australia (ASFA), you may find their idea of a ‘comfortable retirement’ quite different from yours. It’s never too soon to start adding up whether your superannuation is on track with your expectations.
The reality is, most of us will need to work beyond age 55. Many will need the money. Others enjoy what work brings – a sense of fulfilment, mental and social stimulation. Some will reduce their working hours as a way to slowly ease into retirement.
Well, the Government has made it possible to keep working while drawing down some of your super benefits. The policy, called Transition to Retirement, is worth considering as it may allow you to:
Either way, once you hit preservation age (55 for many people), you can withdraw up to 10% of your super as additional income while you continue to work.
So, what’s in it for you.
Boost your super savings
Your super balance will keep growing as your employer continues to make contributions into your super account. Salary sacrificing some of your pre-tax income into your super will further boost your balance.
Pay less tax
Employer contributions and salary sacrificed contributions can be taxed at a low rate when they go into super. This could be lower than your marginal tax rate, therefore reducing your tax.
Ease into retirement
If you want to reduce your work hours as a way of easing into retirement, a transition to retirement pension can be used to supplement your employment income if your reduced income is not quite enough to maintain your current lifestyle.
Before you leap
Before you set up a transition to retirement pension, you need to consider if this is right for you and how it fits with your work and super plans. Here are some things you'll need to think about:
For those who already have a TTR strategy in place.
Should you do anything before 1 July?
If you’re already using a TTR strategy, make sure you review this now to avoid paying any unnecessary tax and to ensure you’re making the most of your opportunities. For example, we encourage you to talk to us about how you can make the most of the current concessional contribution cap* that your cash flow allows.
What about after 1 July?
We encourage you to review your transition to retirement strategy and plan for the year ahead to ensure that you are getting the most out of this strategy.
You should also consult a registered tax agent that will help you make the most of your tax refund.
If you’d like more information on how to effectively plan for the retirement you want, just contact me here.
* For the financial year ending 30 June 2015, concessional super contributions are capped at $30,000 pa, for people aged 48 or under on 30/6/14 and $35,000 pa for people aged 49 or over on 30/6/14.
This document contains general information only. TTLB Investments Pty Ltd (ABN 22 600 525 764) trading as wetalkmoney is not a registered tax agent. If you wish to rely on this article to determine your personal tax obligations, you should consult with a Registered Tax Agent. In preparing this information, TTLB Investments Pty Ltd (ABN 22 600 525 764) trading as wetalkmoney did not take into account the investment objectives, financial situation or particular needs of any particular person. Before making an investment decision, a person needs to consider (with or without the advice or assistance of an adviser) whether this information is appropriate to their needs, objectives and circumstances. Any tax estimates provided in this publication are intended as a guide only and are based on our general understanding of taxation laws. They are not intended to be a substitute for specialised taxation advice or a complete assessment of your liabilities, obligations or claim entitlements that arise, or could arise, under taxation law, and we recommend you consult with a registered tax agent. This information is based on our interpretation of relevant superannuation, social security and taxation laws as at 29 April 2015