By Graeme Quinlan, Senior Adviser
You’re the wrong side of 40, and suddenly the day, when you can access your superannuation, doesn’t seem so far away. But are you satisfied with your current plan for the transition from working life to a happy and secure retirement? It doesn’t matter if you’re in your 40s, 50s, 60s – there are many strategies available to help boost your income after you stop working. And this is relevant to so many of us.
More than a quarter of Australians fear they won’t have enough money to fund their retirement. For women, the figure is a staggering 60 per cent.
I first read those statistics in an article in Melbourne’s Herald Sun looking at strategies people can use at different stages of life to boost their superannuation.
The writer interviewed me for the story, and that’s prompted this post – emphasising that it’s never too late to take action to secure your retirement.
Here are some tips for people who are the wiser side of the Big Four Zero.
In your 40s, the wages might be better than ever, but there are a lot of competing demands for that income – like the mortgage, kids, their education and high day-to-day living costs.
It pays to find out ways to reduce your income tax, such as salary packaging and spouse tax breaks where available.
Other areas of potential advantage:
- Splitting pre-tax super contributions from a higher income spouse into the lower income spouse’s super.
- Putting personal policies such as life and disability insurance into Super if you have significant debts and responsibilities.
- Consider a self-managed superannuation fund (SMSF) if you have already accrued a significant amount and are pro-active about managing your investment and retirement strategies.
- An SMSF can also borrow to invest in property; a highly specialised area that carries risks, but can be worth it in the right circumstances and if the property purchase is not too inflated.
- If you’re playing catch-up, increase your contributions through strategies like salary sacrifice; you can put up to $30,000 a year into your Super.
A lot of opportunities to maximise your superannuation open up in your 50s. It’s a good time to review your position, and even consider putting more into your Super than, say, the mortgage. There are too many strategies to mention in this post, but here are a few important ones to consider:
- Over 50’s can now contribute up to $35,000 a year.
- Start withdrawing an income stream from the fund after you turn 55 and the earnings (income and capital growth) from your Super investments become tax-free – even if you don’t retire. (From July 2015 the age threshold for income streams rises to 56.)
- Your income stream strategy strengthens if you contribute after tax money into Super.
For many super fund members their 60s marks the beginning of tax-free living where they can withdraw super money without worrying about the tax man.
The main points:
- No individual tax on any benefits taken from the age of 60.
- Continue to run your income stream and all earnings in your Super remain tax-free.
- Once you turn 65 you’ll be eligible for an age pension if you have assets less than $1.2 million, excluding your home.
- Age pension recipients are entitled to a pensioner health care card – reducing health costs.
- Superannuation estate planning should be set up properly before you turn 65 – after that you risk leaving your dependents out of pocket.
Once you get into your 70s and beyond you still need to pay careful attention to your affairs. If you’ve had good advice, it’s likely the right strategy for you and your circumstances will be firmly entrenched. However, that’s no excuse to get complacent.
- Investments now provide your retirement cash flow (holidays etc!). This needs to be planned and managed (as it does throughout your life).
- It might make sense to restructure pensions – you can do this at any time but the impact needs to assessed.
This is by no means an exhaustive list. Super is a lifelong journey and good professional advice is essential to making the most of your investments.
People worry about the type of fund they choose in the first place, but its importance pales in comparison to making the smart decisions along the way.