There’s something about having a birthday with a ‘0’ at the end that really focuses your attention on the future. And when we’re talking 50 and 60, retirement will no doubt feature heavily in any plans. Retirement should be seen as the chance to try something new and, if you’re lucky, take things a little easier. To be able to achieve this takes good financial planning. Happily, it’s never too late to use the strategies and tools available to ensure your retirement plans are tracking as they should.
At 50 years of age you can start to take advantage of the increased concessional contribution cap, allowing you to boost your superannuation balance by salary sacrificing as much as you can afford. Combined with your employer’s superannuation contribution, you can add a maximum of $35,000 per annum into super before tax, as long as you were 49 years of age or older at 30 June 2015.
This is also when you would seriously start reducing your levels of debt by paying down your mortgage, credit-card balances and any personal loans you may be holding.
It’s important to balance your superannuation contributions with the need to reduce your debt, so don’t commit to salary sacrificing more than you can really afford. Thanks to compound interest, even a small additional amount each month can make a considerable difference to your superannuation balance over 10 to 15 years.
When you turn 56, you may wish to start considering a transition to retirement (TTR) strategy, which enables you to draw an income from your superannuation in the form of a pension, while topping up your superannuation with salary sacrifice contributions. As well as giving you the means to perhaps work less hours or try a different career, a transition to retirement strategy can also have tax benefits. This is especially true once you reach 60 and your payments from superannuation are tax free. When you can commence such a strategy actually depends on your year of birth, but the sooner you investigate whether it will work for you, the sooner you can implement when the time is right.
If the children have moved out, then this is also when you might wish to consider downsizing the family home or moving to the area in which you wish to live in retirement. It’s often easier to move sooner rather than later – not only are you more physically capable, but it’s also usually easier to secure finance for a home the younger you are. Also, it will give you plenty of time to settle into the area and become part of the community in which you will spend a lot of time in the coming years.
Turning 60 is when you should be applying for a Seniors Card – a concession card issued by state and territory governments that can save you a considerable amount of money on utilities, public transport, and goods and services provided by local businesses. Each state and territory has slightly different eligibility criteria, so you should check yours with the relevant Seniors Card office.
You may also wish to consider bringing forward two years’ worth of non-concessional (after-tax) contributions to your superannuation. Currently, the limit is $180,000 per annum, but if you’re under the age of 64, you can bring forward two years’ contributions and deposit up to $540,000 in one year, with no contributions allowed for the next two. After 65, you must meet the work test rule (worked for at least 40 hours over 30 consecutive days in the financial year) to be able to make the contribution.
From the age of 65, you can make a claim for a government Age Pension, although when exactly you are able to make the claim will depend on your year of birth. The eligibility age is in the process of being increased to 67. You must meet other criteria, such as residency, and an assets and income test. With the Age Pension, you will also be issued with a Pension Concession Card, which will entitle you to discounts for prescription medicines, medical services, utilities, rates and many other services.
If you are planning on making a withdrawal from your superannuation fund at this stage, you may wish to consider an income account that converts your super savings into regular payments, while still enabling you to receive an Age Pension. An alternative to withdrawing a lump sum, this account will allow you to maximise your income in retirement, by keeping funds invested until you need them, to ensure your retirement savings lasts as long as you do.
Learn more about making the most of your retirement savings.
This article has been sponsored by AustralianSuper Pty Ltd ABN 94 006 457 987, AFSL 233788. The views expressed are those of YourLifeChoices and not necessarily the views of AustralianSuper. The article contains general information and you should consider if it is right for you.