Making The Most Of Your Retirement Income

You’re about to retire; you’ll finally have the extra time to spend with family and friends and do the things you never had time for while working.
But there’s a voice in your head, a reminder that you’ll be on a budget and you may not be able to spend as freely as you used to… and let’s face it, it’s putting a downer on your upcoming time in the sun.  

Thankfully, with the right strategies, you can boost your retirement savings, maximise your social security entitlements and receive generous tax concessions – this all adds up, helping to make those hard earned savings last even longer.

Here are five tips to help you make the most of your retirement savings so you can get on with enjoying your retirement.

1. Boost your super holdings before 65
   It’s much easier to contribute to your super when you're under the age of 65.  Once you turn 65, a work test applies and it may be more difficult to get funds into this favourably taxed environment. Under the work test, in order to make a contribution, a person would need to work 40 hours in a 30-day period during the financial year. Therefore, if you’re nearing retirement, it may be worthwhile to consider selling other investments or assets and then re-investing the proceeds into your super fund.
   
   The timing of this is crucial, as limits apply. It’s something that should be planned well in advance, not just in the last year before you turn 65!
   
   This contribution will be considered a personal, after-tax contribution, which is tax-free! Once you have maximised your super balance most people will commence an income stream, and if you’re over 60, this income is tax-free. Compare this to your other assets where income may be taxable and you can see that boosting your super may be beneficial.
    
2. Reinvest your super
   If you're aged between 55 and 59, you may be eligible to withdraw up to $180,000¹ from your super benefit without paying tax on it. But did you know you could also re-contribute it to your super fund?
   
   Any amount you re-contribute is considered a personal after-tax contribution², so it will be part of the tax-free component of your super benefit. You can then draw a tax-free income from your super account to help you meet your living expenses until you turn 60.
   
   This may sound like a bit of a juggle, but it could mean a whole lot more for you in retirement!
    
3. Save with a health care concession card
   If you retire before the pension age, and your income is less than $519 per week for singles or $899 per week for couples, (as of July 1, 2014) you may be eligible for the low-income health care card, which covers you for GP bulk billing, cheaper prescriptions and other medical concessions.
   
   It’s the little things like this that can help add up to the bigger picture; and when it comes to stretching your retirement savings, this is a big step in the right direction.
    
4. Contribute to your still-working partner's superannuation
   You're at pension age but your spouse isn't… make the most of this situation – and I don’t mean by rubbing it in, rather a tactical move to reduce your assessable financial assets and increase your pension entitlements. And before they ask, yes, there is something in it for them!
   
   You can cash out up to $540,000³ from your super and put it in your spouse’s superannuation account as an after-tax contribution. Not only does this benefit you, but the amount you contribute to your spouse’s super then increases the tax-free component of their superannuation, potentially reducing the tax on any withdrawals.
   
   Happy spouse, happy house!
    
5. Salary sacrifice while you're still working
   You may already know about salary sacrificing as a tax-effective strategy and there are even more benefits to it if you're aged 55 or over and plan to keep working. By asking your employer to sacrifice part of your pre-tax income directly into a super fund and then using a transition to retirement pension (TTR) to replace your salary, you could potentially reduce your tax.

With the right advice, you can increase your retirement funds without reducing the money you have to live on – which is music to anyone’s ears!

The Australian Super Funds Association (ASFA) suggests that a couple will need $56,317 a year to fund a comfortable retirement, and when you consider that many Australians will live for 20 years or more after retiring, that’s a significant amount to save.

Start looking into these handy tips now and you’ll be well on your way.
 

Ask us
Remember that super laws may change from year to year, and everyone's financial circumstances are different. So make sure you speak to us before putting any super strategies into action.
 

1 Low rate cap for 2013/14-tax year. Indexed by AWOTE annually to the nearest $5,000.
2 Subject to excessive contribution tax or return of excessive contribution if exceeding contribution caps.
3 Be aware that benefit tax may be payable if you are aged between 55 and 59.