The ages and stages of retirement

Our finance expert Richard Shermon explains the finer points of retirement.

The ages and stages of retirement

Our finance expert Richard Shermon explains the finer points of what you can do between the ages of 50 and 75 years to retire well.

Do you remember buying your first car? Or maybe putting down that deposit on your first house? Life has many memorable milestones, so as you look forward to your retirement years, what are some of the financial events for which you need to prepare yourself? Let’s take a look.

Age 50

At this stage of your life, you may want to pay attention to retirement planning. When you’re in your early fifties, you may have paid off a significant chunk of your home loan and your children may be on their way to financial independence. So, this is when you could really be saving more of your surplus income for your retirement.

One of the most tax-efficient ways to save for retirement is superannuation via concessional contributions, which includes employer super guarantee contribution (SGC) and salary-sacrifice payments. For people aged 49 or over on 30 June, the current limit for concessional contributions is $35,000. These contributions are typically only taxed at 15 per cent, rather than your marginal tax rate, making this a very tax-effective form of saving.

Age 55

At this age, you have already reached, or are very close to, your preservation age. This is when you can potentially first access your superannuation, even if you are still working. This strategy is called Transition to Retirement (TTR).

Basically, a transition-to- retirement plan involves using part or all of your accumulated superannuation fund to start a pension. However, this pension – often termed an income stream in the financial industry – must be funded from your existing superannuation money.

The income received must also be above a prescribed minimum level (which is currently four per cent of the fund balance per year if you are under the age of 65) and below a maximum level of 10 per cent of the fund balance each year.

Age 60

This is the age to apply for your Seniors Card, so you can obtain discounts from thousands of businesses – and you’ll never again have to pay the full fare for nationwide public transport.

If at preservation age using your superannuation fund to start a pension didn’t make financial sense – such as a high marginal tax rate or a large taxable component in your superannuation fund – then, when you reach 60, it almost always does, as the income you have to draw would now be completely tax free.

Also, with retirement fast approaching, it may make sense to top up your retirement savings over and above the $35,000 of concessional contributions. These extra contributions are termed ‘non- concessional’ and can be funded by using other savings or perhaps an inheritance.

The current annual limit for non-concessional contributions is $180,000, or you can bring forward two future years’ limits – i.e. a total of $540,000. Since this money has already been taxed at some stage in your personal name, it’s received by your superannuation fund tax free.

Also remember that once you reach age 65, you will have to meet the work test in order to make these non-concessional contributions.

Age 65–70

This is when you reach the Age Pension age, where you might be entitled to receive a government pension and the associated Pensioner Concession Card. The qualifying age is currently 65 years for anyone born before 30 June 1952. This age increases progressively to 67, depending upon your date of birth. However, in a recent announcement, the Federal Government proposed the age may increase to 70 for anyone born after 1 January 1966.

As you approach Age Pension age, you may wish to consider a number of strategies to potentially increase any entitlement. If you don’t qualify for an Age Pension, don’t forget to apply for the Commonwealth Seniors Health Card. Finally, remember that 70 is the age limit for making any spouse contributions to boost your partner’s superannuation.

Age 75

If you are still working, this is your last chance to top up your superannuation via a personal super contribution or a salary-sacrifice arrangement.

Many readers will fondly remember a time – before CDs and MP3s – when we used to listen to music on vinyl records. Someone once compared life to the classic double album with its iconic gatefold cover. As your life moves well into side three of your own double album, you’ll still have many memorable milestones ahead for which to prepare and enjoy.

This article provides general information only. It does not take the place of professional financial and taxation advice. See an accredited financial professional for individual-based advice.

Richard is an authorised representative (number 340002) of Dover Financial Advisers (AFSL 307 248; ABN 87 112 139 321)

Read Richard’s full business profile.

For a guide on how transition-to-retirement income streams (TRIS) are taxed, visit the Australian Taxation Office website.





    COMMENTS

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    Bonny
    23rd Jul 2015
    11:08am
    Sounds like traditional financial planning to me.

    23rd Jul 2015
    11:31am
    Finally there's the terminal stage.
    MICK
    23rd Jul 2015
    1:13pm
    That class is poorly catered for. Maybe because they cannot pay......smilie!
    Come on YourLifeChoices team....put some icons on this website. One needs to spread a bit of fun and a smile occasionally....even if one is in pain.
    MICK
    23rd Jul 2015
    1:11pm
    Of course this article fails to discuss the fact that many people are unable to retire because they have been caught out with this government's changes to superannuation legislation which has imposed fairly unreasonable cut-off tests for both income and assets.
    Night one assume that the article was written by somebody in the retirement planning industry looking for clients?
    Anonymous
    23rd Jul 2015
    6:57pm
    mick, that is exactly who wrote the article. Click on the link above "Read Richard's full business profile", if you're interested.
    Happy cyclist
    23rd Jul 2015
    1:26pm
    Even if I am still working full-time but over 60 can I apply for a Seniors Card? I was told no, but this indicates I can. Does anyone know? And if yes, do I apply through CentreLink?
    greygeek
    23rd Jul 2015
    3:05pm
    In WA. one applies through the State Government "Office of Seniors" and there is a limit as to the number of hours worked each week. it is not available for a full time employee.
    Happy cyclist
    23rd Jul 2015
    3:08pm
    Thanks gg, I'm not in WA but suspect it would be the same here. Hc
    Nan Norma
    23rd Jul 2015
    3:19pm
    Happy, yes you can. Everybody should rember that you can find just about all the information you want on your computer.
    Anonymous
    23rd Jul 2015
    6:28pm
    Seniors' Cards differ from state to state/territory as do their rules for eligibility and age qualifications/entitlements. Best to check under your own state for "Seniors' Card" on the Internet.
    Eclair
    24th Jul 2015
    12:41pm
    In SA you would be ineligible. The following is straight from the official website:
    You're eligible for a Seniors Card if you meet the following three criteria:
    you're aged 60 years or older
    you're a permanent South Australian resident
    you're not working more than 20 hours per week in paid employment (part-time and casual employees may average their hours over a 12 month period).
    fatman
    23rd Jul 2015
    3:16pm
    To happy cyclist. YOU CANNOT GET A SENIORS CARD IF YOU ARE WORKING FULL TIME.
    Seniors cards are issued by each state government to anyone that is aged 60 or over, who is not working, or only working up to 20 hours per week. I think you can get concessions for public transport, plus discounts at retail outlets etc, who usually display a sign in their window, "seniors discount available here"....see computor for seniors card / apply for seniors card.
    Happy cyclist
    23rd Jul 2015
    4:21pm
    Thanks Fatman, that is as I would have thought but the article is misleading and I thought I should ask. Something to look forward to if I ever do retire!
    Anonymous
    23rd Jul 2015
    6:41pm
    H.c., the information from fatman is incorrect. As I have said above, Seniors' Cards differ from state to state, as do age requirements. In Queensland you can acquire one when you are 60 and still working full time which entitles you to discounts on certain retail goods, etc. So, don't take "no" for an answer and look on the net under your state of residence. Good luck.
    Radish
    23rd Jul 2015
    4:02pm
    Could not agree more. You need to plan for your retirement...no good waiting until you retire and then realise you will not have the money you require to have a comfortable lifestyle.
    I sincerely hope those coming behind us have the sense to do something about their retirement years.

    23rd Jul 2015
    5:24pm
    All the above suggestions about what to do during the ages and stages of retirement are subject to change without notice by a shortsighted, dispassionate, inept, and self-centred government.
    Rae
    23rd Jul 2015
    6:36pm
    I don't believe it is possible to plan for retirement using superannuation because the rules are changed each and every budget.


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