Tag Archives: Retirement Planning
11 things everyone should know about their super
By Robert Wright /October 25,2021/
Super is there to provide you with an income when you stop working and it may provide a tax-effective way to save for your retirement over the long-term.
What’s probably more interesting, is in time, your super may become one of your largest assets. We don’t often think about that, but it’s a good reason why you may want to pay closer attention to it.
Here are some things worth knowing or which may even interest you to investigate further.
1. Who pays your super
Generally, your super savings will build up over the course of your working life, as money you earn is put into super by yourself, or by your employer under the super guarantee, if you’re eligible.
You can make additional voluntary contributions to your super to boost your retirement savings if you choose to. However, there are limits on the amount you can contribute each year and there are separate caps, depending on the types of contributions you’re making.
2. Where your money’s invested
Any time money is deposited into your super, it’s invested on your behalf by the trustee of your super fund.
Investments can be made into property, shares, cash deposits and other assets depending on your default investment profile, or if you’ve made your own investment selections.
Most funds will allow you to choose from a range or mix of investment options and asset classes and choosing the most suitable option will typically come down to your attitude to risk and the time you have available to invest.
3. How to see what your employer’s paying you
Super guarantee (or SG) contributions made by your employer, if you’re eligible, should be at least 10% of your ordinary (not overtime) earnings if you’re making $450 or more each month. Note, others may also be eligible.
Meanwhile, as these contributions may be the foundation of your future savings, it’s important to check they’re being paid correctly. You can do this by reviewing your payslips, checking your super statements, calling your super fund or logging into your online account to see what’s been put in.
Keep in mind, employer super contributions also only have to be paid into your fund four times a year (at a minimum), on dates set by the ATO, which means your super may be paid at different times to your employment income.
4. Where to go if something doesn’t look right
If your employer hasn’t paid your super, speak to the person who handles the payroll at your work. If you’re not satisfied with what they tell you, you can lodge an unpaid super enquiry with the ATO.
5. How your current super balance stacks up
In many cases you can check out your super balance online via your super fund’s website or the statements they send you.
Meanwhile, if you’re interested to know how your balance fares and what you might need each year in retirement, the Association of Superannuation Funds of Australia puts out a report each quarter.
If you’re curious to know how your super balance shapes up against others your age, check out the average super balances for employed people of different age groups across Australia.
6. How to find your lost or unclaimed super
At last count, there was more than $13 billion in lost and unclaimed super waiting to be claimed across Australia.
That can happen when you set up a new super fund and forget to roll over what you accumulated in a previous one, or if you forget to update your details with your providers when you change them.
You can search for lost or unclaimed super by doing a super search with your current super fund or by logging into your MyGov account to find your super funds.
7. What to look out for if you roll two funds into one
If you have more than one super account, there may be advantages to rolling your accounts into one, such as paying one set of fees and less paperwork.
If you do decide to consolidate, make sure you don’t risk losing features and benefits including life and other insurance that may be attached to the account you’re considering closing
8. How to check your insurance if you have it
Most super funds let you pay for personal insurance out of the money in your super fund, but there are pros and cons worth weighing up.
For instance, insurance through super can often be cheaper than personal insurance bought outside super, but you may not get the same level of cover.
9. How to make sure the right people get your money if you pass away
If you don’t nominate a beneficiary with your super fund, your super fund may decide who receives your super money when you pass away, regardless of what you have in your will.
There are generally two types of beneficiary nominations you can make, binding and non-binding.
If you make a binding nomination, your super fund is required to pay your benefit to the person or people you’ve nominated, as long as the nomination is valid when you pass away. Keep in mind, some binding nominations are lapsing and may only remain valid for three years.
If you make a non-binding nomination, your super fund will have the final say as to who receives your super benefits, but they will attempt to find all potential beneficiaries and decide who’s the most appropriate.
10. What age you can withdraw your super
The government sets general rules around when you can access your super, which typically won’t be until you reach your preservation age (which will be between 55 and 60, depending on when you were born) and meet a condition of release, such as retirement.
At this time, you may choose to take the money as a lump sum, income stream, or even a bit of both.
Meanwhile, there may be some special circumstances where you may be able to withdraw your super early.
11. When can you no longer contribute to super
Once you turn 75, generally you can no longer make voluntary contributions to your super, with some exceptions, which may include if you’re selling your home and making a downsizer contribution. Compulsory SG contributions made by your employer, if you’re still working, can still be paid.
Many people think of their super as an investment that takes care of itself, but the choices you make about your super today, could make a big difference to your quality of life later on.
Source: AMP
Your 7-point retirement planning checklist
By Robert Wright /October 25,2021/
You might feel emotionally ready to retire but you’ll want to make sure you’re financially ready too. Socialising with mates, enjoying leisurely activities and indulging in the odd trip away are all things that have likely crossed your mind when thinking about how you’ll spend retirement.
Beyond that though, have you given much thought to the logistics and what it’ll cost? If you haven’t, there are a number of big points worth considering, which is where this checklist may come in handy.
1. Do I have to retire by a certain age?
The retirement age in Australia isn’t set in stone. You can retire whenever you want to, but factors that could play a part might include:
- your health
- financial situation
- employment opportunities
- your (and your partner’s) individual preferences
- the age you can access your super.
2. What’s on my to-do list?
Think about what you may like to do in retirement and what the bigger and smaller priorities may be. Consider things such as:
- your social life and recreation
- staying active and healthy
- different retirement living options, which might include relocating to a new city
- helping the kids, if you have any.
3. How much money will I need?
According to March 2021 figures from the Association of Superannuation Funds of Australia (ASFA), individuals and couples, around age 65, who are looking to retire today, would need a certain annual budget to fund a comfortable lifestyle versus a modest one.
ASFA figures are based on the assumption people own their home outright and are relatively healthy. Check out the suggested annual budgets below compared to current maximum Age Pension rates being paid by the government.
| Comfortable lifestyle | Modest lifestyle | Full Age Pension rate | |
| Single (annual budget) | $44,412 | $28,254 | $24,770 |
| Couple (annual budget) | $62,828 | $40,829 | $37,341 |
4. Where will my money come from?
The money you use to fund your life in retirement will likely come from a range of different sources, such as:
Your super fund
Generally, you can start accessing super when you reach your preservation age, which will be between 55 and 60, depending on when you were born, and retire. Knowing your super balance is a crucial part of planning for retirement, as it’s likely to form a substantial part of your savings.
Investments, savings or an inheritance
You may be planning to sell or use income you’re generating from shares or an investment property, or use money you’ve saved in a savings account or term deposit to contribute to your retirement. An inheritance or proceeds from your family’s estate may also help in your later years.
Government benefits
Depending on your circumstances, as well as your income and assets, you may be eligible for a full or part Age Pension from age 65 to 67 onwards (depending on when you were born), or you mightn’t be eligible at all.
Along with your savings, government benefits, such as the Age Pension, as well as Carer’s Allowance and the Disability Support Pension, could be an important part of your retirement income.
Concession cards, which are provided if you receive certain government income support payments, or the Commonwealth Seniors Health Card could also help you access discounts on health care and other things.
5. How can I withdraw my super?
Depending on how you withdraw your super and at what age, there will be different tax implications worth investigating, which will depend on your individual circumstances.
In the meantime, some of the options you’ll have around withdrawing your super include:
Transition to retirement pension
A transition to retirement pension enables you to access some of your super via regular payments (once you’ve reached your preservation age), whether you continue to work full-time, part-time or casually.
Account-based pension
If you’d like to receive a regular income when you do retire from the workforce, an account-based pension (also known as an allocated pension) could be a tax-effective option, noting the value of it will be based on the super you’ve saved, so won’t guarantee an income for life.
You also won’t be limited in what you can take out, but each year you’ll need to withdraw a minimum amount. Note, you can only transfer up to $1.7 million in super into this type of pension too.
Annuity
Another option is an annuity product, which generally provides guaranteed payments over a set number of years, or the rest of your life, depending on whether you opt for a fixed-term or lifetime annuity. They tend to be a more secure option as they provide a guaranteed income regardless of what might happen in financial markets. However, you’ll be sacrificing some flexibility as you can’t usually make lump sum withdrawals and your life expectancy may also be a consideration.
Lump sum
Taking some or all of your super savings as a lump sum can be tempting, particularly if you want to pay off debt, assist the kids, or go on a holiday. However, it might not be the best option for everyone, as you’ll need to consider how you fund your lifestyle after the money is gone. While you may be eligible for government entitlements, such as the Age Pension, it might not cover the type of lifestyle you’d like to have after you finish working.
6. What other matters will I need to address?
Existing debt
When planning retirement, you may want to consider what outstanding debt you have and ways you may be able to reduce it while you’re still earning an income.
Insurance
You might have personal insurance, possibly tied to your super fund, but it’s worth checking you have the right type and that it’s appropriate for you. After all, what you require in retirement could be quite different to when you’re working.
Investment preferences
Investments are part of many retirement planning strategies, and when you’re retiring, it’s worth reviewing your investment style and the options you’ve chosen.
For instance, in retirement, you might consider a more conservative approach with less risk, as when you’re younger you generally have more time to ride out market highs and lows.
Estate planning, including your will
It’s important to think about your estate planning needs. For instance, have you documented how you want your assets to be distributed after you’re gone and how you want to be looked after if you can’t make decisions later in life?
7. Do I want to make any final super contributions?
The more you can put into super before retiring, the more money you’re likely to have when you retire. You may also be interested to know that when you reach age 65 or over, you can make a voluntary contribution to your super of up to $300,000 using the proceeds from the sale of your main residence.
For couples, both people can take advantage of this opportunity, which means up to $600,000 per couple can be contributed toward super. There are however, downsizer contribution rules you’ll want to be across.
Source: AMP
Downsizing your home? Understanding the downsizer contribution
By Robert Wright /August 26,2021/
Downsizing the family home is often part of the longer-term financial plans for many older Australians. But did you know that you could consider investing the proceeds of the sale of your family home to your super – depending on your age and circumstances – as a downsizer contribution?
What is a downsizer contribution?
If you’re aged 65 years or older, you may be eligible to make a downsizer contribution of up to $300,000 to a complying super fund from the proceeds of the sale of your primary residence, which is owned for 10 years or more.
A downsizer contribution doesn’t count towards any of the contribution caps – and can still be made even if a person has total super savings greater than $1.7 million, or if they do not meet the work test requirements. It is a once-off option and doesn’t apply to the sale of any residences in the future.
Your spouse, provided they are also aged 65 years or older, can also make downsizer contributions to their own super, of up to $300,000 from the same proceeds, even if they are not an owner of the property. To do this, the sale price is key, as your couple contributions cannot be more than the total sale price of the property.
The benefits of the downsizer contribution:
No work test requirements
There is no requirement to meet a work test or work test exemption for this contribution, which makes it ideal for those aged between 67 and 74. It is even more appealing if you are aged 75 or over, as outside of this opportunity, you can no longer make voluntary contributions.
Contribution caps don’t apply
It doesn’t matter how much you already have in your super – the total super savings test (must be $1.7 million or less to make after-tax contributions) doesn’t apply for downsizer contributions.
May be more tax-efficient
The downsizer contribution is an after-tax contribution, so no tax is paid on the way in. And because you are over 65, it is returned tax free when you withdraw the funds in the future.
You don’t have to buy a new home
The money you make from the sale doesn’t have to be used to purchase a new home, and there is no need to move to something smaller or cheaper. If it involves the sale of a previous principal residence (that is now an investment property), there is actually no need to move at all.
Who is eligible?
In addition to the age 65 threshold, there are a number of other important criteria to be met.
You must sell a property that is located in Australia, and you must have owned the property for at least 10 years.
When you sell that property, you need to be eligible for some form of exemption from capital gains tax (CGT) on the sale of the property under the “main residence” provision. Basically, this means the property needs to be your principal place of residence for at least some time during its ownership.
If you purchased the property before 20 September 1985 (so that CGT doesn’t even apply), you still need it to have been your principal place of residence at some stage during ownership.
Keep in mind, it also doesn’t matter if the exemption from CGT is a full or partial exemption, which means the property could have been an investment at some stage during your ownership of it.
What a downsizer contribution could look like
Here are some hypothetical examples of how downsizer contributions could work in different situations.
Example 1:
Martin and Sharon are both aged in their 70s, own their home jointly and have lived in it for 25 years.
They sell their home on 1 August 2021 for $550,000 and the settlement date is 13 September 2021. They are exempt from capital gains tax (due to the home having been their primary residence).
Under the downsizer contribution measure, within 90 days, Sharon makes a downsizer contribution to her superannuation of $300,000 while Martin contributes $250,000 to his superannuation.
Though the cap on downsizer contributions is $300,000, Martin only contributed $250,000 because the combined contributions cannot exceed the sale proceeds of their home. They could have also split the contributions evenly, contributing $275,000 each.
Example 2:
Roger is aged 66, Mel is aged 63, and they live in a home purchased by Mel 20 years ago.
Mel sells the home for $900,000 on 15 July 2021 and the proceeds are exempt from capital gains due to it being their primary residence.
Roger can make a downsizer contribution of up to $300,000 within the 90-day period but as Mel is under age 65, she is unable to make a downsizer contribution.
Does it impact the Aged Pension?
If you qualify, or are hoping to qualify for the Age Pension, the impact of selling an asset needs to be considered. The value of your main residence is excluded from the assets test, however if it is sold, and some of the proceeds added to your super, that value will then be assessed and may reduce your age pension benefits.
How do you make a downsizer contribution?
If you are eligible, you’ll need to complete a downsizer contribution form and provide this together with or before your contribution, to your complying superannuation fund so it can be correctly classified. The form is available from the ATO website. You can elect to notify your super provider in advance of the contribution also.
It’s important to be aware of the timing of your contribution into super. The contribution must be made within 90 days of receiving the proceeds of sale (or longer permitted period), which is usually the date of settlement.
Source: BT
Adding more to your retirement savings: is it worth it?
By Robert Wright /August 26,2021/
There’s no denying that being proactive with your super may be key to increasing your retirement savings.
As an investment vehicle, super can offer significant benefits thanks to the magic of compounding interest. It also provides one of the best tax structures available.
Why super offers much promise for retirement saving
Adding more into super is not only a good way to invest your income, it also helps your retirement savings grow so that when you do retire, your money will still be worth something.
Depending on your income and how much you can afford to contribute, adding more into your super may be a decision that could benefit you in retirement.
Why? It boils down to two key things.
Magic of compound interest
The first, is the magic of compounding interest – the process of earning interest on your interest and so on.
For example, if you invested $10,000 at 5 per cent per year, each year you would earn $500 in simple interest. However, when you add in the magic of compounding and allow the $500 interest earned in the first year to be added to your account balance, then repeated each year during the 5-year period, after 5 years you would have earned a total of approximately $2,762 in interest (compared to $2,500 in interest after 5 years using simple interest). This would give you a total of $12,762 after 5 years.
But that’s not all.
One of the best tax structures available
From a tax point of view, super can be incredibly powerful.
By making extra contributions to your super fund using your pre-tax income, up to the current annual contribution cap of $27,500 (2021/22), you could benefit from those contributions being taxed at just 15 per cent. This is potentially a lot less than the personal tax you would pay on your income.
If your spouse is a low-income earner, there are tax benefits you could gain too for making a contribution to their super.
But like most good things, super is not without its drawbacks.
Limitations of super for retirement saving
Super does have some limitations as an investment vehicle. For instance, you can only make up to $27,500 in super contributions before-tax in the 2021/22 financial year (this amount includes your employer’s contribution of 10 per cent of your salary) or up to $110,000 in after-tax contributions in a financial year. You may be liable for more tax if you exceed these limits.
There are also limitations on when you can access your super.
Get support
Planning for your retirement can be a complex and a challenging area to get your head around.
So if you’re keen to supercharge your retirement savings, but aren’t sure how to go about it, then speaking to a financial adviser can be a good way to go.
Bottom line: Being proactive with your super will likely make a significant difference to the size of your final nest egg.
Source: BT