Flexible retirement planning

March 3rd 2023 | Categories: Retirement |

Instead, those who have the flexibility to choose are often transitioning out of the workforce over several years, or even returning to work part-time after a break. Whether you simply want to wind back your working hours to explore other interests or don’t want to cut your ties with work completely, to make it work, you need to plan.

Choosing your retirement date

There is no set retirement age in Australia, but most people will not be eligible to receive an Age Pension until they reach age 67.ⁱ This means you need enough savings to provide another income source if you retire earlier. Although most of us have super, you cannot access it until you reach your preservation age, which can vary. Withdrawing your super also requires you to meet a condition of release. There are various conditions, but the most common one is reaching age 60 and permanently retiring from the workforce. Once you turn 65, you can access your super whether you are working or not.ⁱⁱ Remember, tax also affects your super, with different rates applying depending on your age. Most people can access their super tax-free once they reach 60.

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Paying for your retirement

Unfortunately, there is no simple answer to how much income you will need in retirement. It depends on your current lifestyle and what your dream retirement looks like, but a good place to start is the ASFA Retirement Standard. For around 62% of the population aged 65 and over, the main source of retirement income is the Age Pension and government payments.ⁱⁱⁱ Eligibility for an Age Pension is assessed using your age, residency status and personal income and assets. These determine whether you receive the full fortnightly payment rate, which is currently $1,547.60 a fortnight for a couple.^iv As part of your planning, check for other potential sources of income from investment assets, contract work, or rent from investment or Airbnb properties.

Using your super savings

While you may dream of retiring early, many of today’s retirees can expect to live well into their 80s, so your super may need to provide income for more than 20 years. If you are unsure whether your super is on track, we can help you check your progress and put strategies in place to achieve your retirement goals. Most super funds provide online calculators to give a rough estimate of your likely retirement balance and how much income it will provide. ASIC’s MoneySmart Retirement Planner is another resource for working out your retirement income and potential Age Pension payments.

Transition-to-retirement (TTR) pensions

If you want to ease into retirement, a TTR pension can be worth investigating. These allow you to cut back working hours while using your super to supplement your income without compromising your lifestyle with many finding the perfect balance of work-life bliss. If you are aged under 60, you will pay some tax on pension payments, but they are tax-free once you reach age 60.^v TTR pensions also allow you to continue topping up your super through a salary sacrifice arrangement with your employer. You only pay 15% tax on these contributions, which may be lower than your marginal tax rate.^v

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Giving super a late boost

If you have the income to spare as you move towards retirement, perhaps from an inheritance or downsizing your home, there are now additional opportunities to continue adding to your super. You can make personal after-tax contributions of up to $110,000 a year until you reach age 75, even if you are not working. You may even be eligible to use a bring-forward arrangement and add up to $330,000 in a single year. Once you hit 60, if you are planning to sell your current home, you can also make a downsizer contribution of up to $300,000 ($600,000 for a couple) into your super account.

Retiree concessions

When you are doing your retirement sums, don’t forget some of the concessions on offer to older Australians. If you are aged 60 and over and working less than 20 hours per week, your state’s Seniors Card can provide discounts on public transport and some goods and services. You may also be eligible for the Commonwealth Seniors Health Card for cheaper prescriptions and medical appointments or a Pensioners Concession Card for discounted public transport.

If you would like to discuss your retirement options and how to fund them, give us a call or book a complimentary initial consultation.

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What you need to know: This information is provided by Invest Blue Pty Ltd. (ABN 91 100 874 744). The information contained in this article is of general nature only and does not take into account the objectives, financial situation or needs of any particular person. Therefore, before making any decision, you should consider the appropriateness of the advice regarding those matters and seek personal financial, tax and/or legal advice before acting on this information. Read our Financial Services Guide for information about our services, including the fees and other benefits that AMP companies and their representatives may receive in relation to products and services provided to you.

i https://www.servicesaustralia.gov.au/who-can-get-age-pension?context=22526 ii https://www.ato.gov.au/Individuals/Super/ iii https://www.aihw.gov.au/reports/australias-welfare/age-pension iv https://www.servicesaustralia.gov.au/how-much-age-pension-you-can-get?context=22526 v https://moneysmart.gov.au/retirement-income/transition-to-retirement