Advice for Pre-Retirees & Retirees

Increasing the tax free portion of your super can be very beneficial if you plan to withdraw funds as an income stream before the age of 60 and for benefit payments in the event of your death.

There are strategies can be put in place to increase the tax free component of your super balance.

You should seek advice sooner rather than later. That would give you time to decide on a strategy and become comfortable with that strategy. There will be enough other things happening in your life at retirement without having to grapple with major financial decisions.

This is generally different for everyone and depends on the lifestyle you would like to maintain upon retirement. Speak to one of our advisers about what might be right for your circumstances.

Our suggestion is that you talk to a Financial Planner who can explain clearly to you what services they can provide and what the costs will be. All fees and commissions must be disclosed to you so you know how much you are being charged and how much remuneration they are receiving.

Financial planning provides direction and meaning to your financial decisions. It allows you to understand how each financial decision you make affects other areas of your finances.

For example, buying a particular investment product might help you pay off your mortgage faster, or it might delay your retirement significantly.

By viewing each financial decision as part of a whole, you can consider its short and long-term effects on your life goals. You can also adapt more easily to life changes and feel more secure that your goals are on track.

If you elect to commence a super pension you be will required to satisfy a set of minimum standards in order for you to claim an exemption for the income earned on your pension assets. These standards include:

• The pension must be account-based.
• A minimum amount must be paid out to you annually.
• The capital supporting the pension cannot be increased using contributions or rollover amounts once the pension has started.
• Upon your death your pension can only be transferred to a dependent beneficiary of yours.
• The capital value of the pension or the income from it cannot be used as security for borrowing.
• Before a pension can be commuted, the minimum pension must be paid out.

If you elect to commence a Transition to Retirement Pension you will also be restricted to withdrawing a maximum of 10% of your opening balance annually.

If you have made a binding nomination and appointed a beneficiary, this person will receive your funds.  If you haven’t done this, the trustee decides who they pay the money to based on what is set out in the trust deed.

Superannuation death benefits are taxed differently depending on who receives them.  It essentially depends on whether the recipient is a dependent or a non-dependent.

A dependent includes:

• A spouse or de facto.
• A child under 18.
• Someone financially dependent on you (this could include an adult child).
• Or a person with whom you had an 'interdependent' relationship (e.g. may be a same sex relationship or someone with whom you lived in a close and ongoing relationship with  financial and domestic support).

For tax purposes:

• Super benefits paid to dependants are tax-free.
• Benefits paid to 'non-dependents' are taxed.

A TTR is a non-commutable income stream that provides access to your super money prior to retirement and is available to you once you have reached your preservation age.  If you elect to commence a Transition to Retirement Pension (TTR) you will be faced with a maximum pension limit as well as a minimum limit. 

Superannuation benefits are comprised of two tax components:

1. A tax-free component.
2. A taxable component.

The tax free component includes all non-concessional contributions made on or after 1 July 2007 and all pre-July 2007 components of superannuation that have been crystallised.

The balance of money remaining in your superannuation account, after subtracting the tax free component, is the taxable component.

When part of a superannuation interest is paid out as a lump sum or as an income stream, the benefit must always be paid in proportion to the tax free and taxable components.

Generally you can withdraw your non-preserved contributions at any time. However, preserved moneys can usually only be withdrawn when you retire and reach a condition of release.

You cannot withdraw preserved contributions, until you:

• Retire and reach preservation age (between the age of 60 or 55 depending on your date of birth).
• Turn 65.
• Qualify under what is called the “transition to retirement” rules.
• Suffer from a total and permanent disability.
• Have a terminal illness and are under the age of 60.
• Pass away.
• Can show that there is severe financial hardship or other compassionate grounds.

The application forms for Age Pension can be quite lengthy, so we would suggest obtaining these forms from Centrelink approximately 3 months before turning Age Pension age. This will then give you plenty of time to work through the forms and seek advice if required. While the forms can be lodged anytime in the 3 months before turning Age Pension age, we would suggest lodging the forms approximately 2 to 4 weeks prior to this date.

All of our advisers are qualified and licensed appropriately. The changes implemented for education standards have meant that our advisers are studying again to keep up to date with the financial planning industry regulation.

We offer a free no-obligation appointment to discuss your financial matters. Should you wish to utilize our services, our ongoing advice fees can be deducted from your superannuation, pension or investment portfolio.

Aged care appointments are charged at $385 and allow for 2 meetings with Scott Keeley to discuss aged care costs and how to best afford the accommodation needs for your family member entering an aged care facility.