Just because you reach retirement age, it doesn’t mean you should give up work immediately. Seek advice and carefully consider the timing of your retirement so you can make the most of tax efficiencies and other entitlements.
While it might feel like you’ve been waiting a lifetime to finish work, timing is important for making the most of your retirement entitlements. This could include tax efficiencies that may mean the difference between having more to spend on your post-work lifestyle rather than giving it to the tax office.
Similarly, it’s important to assess all other entitlements. For instance, you may wish to delay your retirement in order to be paid long service leave or you could consider taking any annual leave entitlements prior to retirement so that you don’t forego your leave loading.
Pre-retirees may need help to identify and articulate their retirement goals and the cash flow required to achieve that lifestyle. With a clear picture of your financial position, you’ll be able to make informed decisions and that may include choosing to work a little longer or contemplating semi-retirement rather than outright retirement. If retirement funds fall a little short, working part-time could be an option that helps bolster your post-employment cash flow.
For example, you may seek assistance with a customised Transition to Retirement (TTR) strategy. Once you have reached ‘preservation age’, which is currently 55 (if you were born prior to 1960), you can access a part of your superannuation via a non-commutable allocated pension, however some rules do apply. The 2016 budget has also outlined changes to the TTR rules so anyone under the age of 65 (including current retirees) will only be able to access $1.6 million tax free before they retire. These changes come into effect from 1 July 2017.
A TTR may assist in one of two ways. Firstly, you may be able to reduce your working hours or work part-time. The funds you access from your super may make up for the reduction in wages. Alternatively, if you are aged over 60, you can access up to 10% of your super balance tax-free (under the recently announced $1.6 million cap). Given that you have this additional money now, you can divert a part of your salary or wages into your super by way of salary sacrificing. The amount that you salary sacrifice can vary, however it should be equal to or more than you are drawing by way of a pension. This strategy may provide a tax efficient solution for those in higher tax brackets.
You may also look for help in preparing to draw a pension, in ensuring you know how and where your assets are held, how they affect your eligibility and when you may be entitled to a seniors health care card which can provide considerable savings for health and wellbeing services. These are just some of the significant considerations you may need to contemplate ahead of retirement.
If you would like to know more information about planning your retirement, contact us today on 07 3720 1299 or email admin@wealthfundamentals.com.au
Lane Moses Pty Ltd ABN 56 092 186 117 trading as Wealth Fundamentals and its advisers are Authorised Representatives of Fortnum Private Wealth Ltd ABN 54 139 889 535
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The information (including taxation) contained within this document does not consider your personal circumstances and is of a general nature only - unless otherwise stated. Wealth Fundamentals strongly suggests that you should not act on it without first obtaining professional advice specific to your circumstances.
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