fbpx

INSIGHTS WITH EVALESCO

Three strategies for retirement planning
by Kate Buhagiar | 28 February 2024

TOPICS DISCUSSED

Transitioning to retirement
Exploring retirement pension options
Planning lump sum withdrawals

As you start to approach retirement, understanding how you can use your super balance effectively becomes crucial.  

Each strategy has its own set of pros and cons, tailored to suit different financial goals and circumstances. We dedicate ourselves to helping you through these options, ensuring you embark on your retirement journey with confidence and clarity. 

We believe that retirement is one of the most challenging times in someone’s life with lots of decisions and changes being made this can be quite stressful if you are not prepared and have support to get you through it. 

Transitioning to retirement

As you start to plan to retire, you are able to keep working and receive payments from your superannuation fund when you have reached your preservation age (55 to 60, depending on your date of birth) and are still under 65.

If you continue to work before you officially retire there is an option to take a transition-to-retirement income stream as well as maintaining your employment income. If you wish to take advantage of this option, you have to ensure you use a minimum of 4% and maximum of 10% of your superannuation account balance each financial year.

This strategy may not be for everyone, and we recommend speaking with your adviser to ensure this can work for your circumstances.

We have outlined below some of the pros and cons of this strategy.

PROS

  • By deciding to continue working before retiring this strategy allows you to top up your salary with the transition-to-retirement income stream. If you are able to use this additional income wisely, for example by reducing debt, you can improve your financial position.
  • It may allow you to scale back your work commitments but maintain your financial commitments and plans
  • Any leftover funds at the end of the month can be placed back into superannuation fund and can even be done by salary sacrificing, which could prove tax effective.
  • One of the biggest benefits of this strategy is if you are over the age of 60, the pension payments are tax free.

CONS 

  • By using this strategy and withdrawing funds from your superannuation fund, means that you will have a lower super balance when you retire.
  • The taxable portion of this transition-to-retirement pension payment is taxed at the normal marginal tax rate, and you will receive a 15% tax offset as well if you are aged between 55-59.

Exploring retirement pension options

This is another option that provides a regular income for you once you have officially retired. You are allowed to withdraw as much as you like as long as you don’t exceed the personal transfer balance cap.

We have outlined below some of the pros and cons of this strategy. 

PROS 

  • Although there is no maximum amount you can withdraw, there is a minimum amount that must be withdrawn each financial year.
  • If you decide you wish to return to work, it won’t affect the income stream that you have begun.
  • You have the option to select how you wish to receive the pension payments, you can select from weekly, fortnightly, monthly, or annually. This means you can tailor your income to meet your needs.  Including, drawing an income stream to replicate the salary that you have been used to before retirement.
  • Retirement income streams of this nature are typically tax free.
  • Additionally, earnings and capital growth in the pension account may be tax free.

CONS 

  • This account-based pension option may affect your Centrelink entitlements
  • You may be at risk of the funds in your super that you draw on won’t last as long as you do
  • The transfer balance cap limits the amount you can use for your pension

Planning lump sum withdrawals

As you start to plan to retire or officially retire you may decide to go on that holiday or buy a caravan and travel the country and therefore want to explore withdrawing from your super in lump sums. This is an option if you meet the working and age rules. One thing to consider is that you can opt to take your superannuation out with a combination of pension and lump sum payments.

We have outlined below some of the pros and cons of this strategy.

PROS

  • If you are 60 years old or older you may only pay little to no tax
  • You can use this strategy if you wish to purchase assets outside of superannuation, for example to buy an investment property or even a caravan or car.
  • You may be able to access a lump sum from super to pay down debt at retirement

Cons

  • If you do wish to use this lump sum withdrawal strategy to start investing, you may pay more tax on investments outside of super.
  • It may reduce your retirement savings
  • It may affect your entitlement to Centrelink benefits.

We understand that retirement is a big change for most people as it represents the ending of a phase of your life where you probably spent 30 to 40 years. There may even be uncertainty as to what is next but the one thing to be sure of is that our team will guide you every step of the way.

As your adviser we will consider all options when you are in the yearly years of planning to retire, so you have all the information for when you make that leap and retire.

If you wish to speak to an adviser click here.

SHARE OUR INSIGHTS

Share on Facebook

Share on Email

Share on Linkedin

NEWSLETTER

Sign up to get the latest insights with our newsletter delivered straight to your inbox

Slide
“How will I measure the value or success of receiving financial advice?”

We believe the true value of financial advice isn’t found in dollars and cents (although this is important too!) but in the peace of mind a financial plan can provide. It’s knowing where you want to go and how to get there, with a dedicated team behind you every step of the way.

Slide
“How do I know Evalesco is the right fit for me?”

We know the impact of good holistic financial advice can make and we have the life experience, technical capability and quality support team that can make that difference for you. We’ve empowered over 1000 families through the delivery of great financial advice, to be healthy, wealthy and happy.

Slide
“How do I know how much money I will need to retire?”

The amount of super you’ll need when you retire depends on your big costs in retirement and the lifestyle you want. The Associate of Superannuation Funds of Australia (ASFA) estimates for a single $44,224 a year and for couples $62,562 a year is how much you may need. This is only an indicator and our advisers assess everyone’s individual circumstances.

Slide
“Why should I pay for financial advice?”

The fees we charge for financial advice is only a fraction of the value we derive for our clients, meaning our clients are always better off after seeing us. Rarely do we encounter a new client invested appropriately for their needs, with adequate risk protection, structuring and estate planning provisions in place. Even small tweaks to a financial plan over a long period of time can result in drastically better outcomes for our clients which eclipses the fees of the financial advice. Additionally, you can opt-out of an ongoing fee arrangement at any time.

Slide
“How do you charge for your services?”

In our discovery meeting with you our advisers discuss the initial advice fee and the ongoing fees associated with our services.

Slide
“What is the process for getting your own personal financial plan?”

After our initial phone call to discuss why you are seeking a financial adviser, we arrange a discovery meeting that outlines what is important to you, your current position, our areas of advice, our approach. We then present a Statement of Advice (SoA) to discuss your goals and our recommendations and go through the steps of how to proceed to the implementation stage. After answering any questions you may have, you will sign the authority to proceed and complete any application forms before we implement our recommendations detailed in the SoA.

Slide
“Should I pay more off my mortgage or put more money into super?”

One thing to consider is the interest rate on your home loan in comparison to the rate of return on your super fund. Before making a decision, it’s also important to weigh up your stage in life, particularly your age and your appetite for risk. Whatever strategy you choose you’ll need to regularly review your options if you’re making regular voluntary super contributions or extra mortgage repayments. As bank interest rates move and markets fluctuate, the strategy you choose today may be different from the one that is right for you in the future

previous arrow
next arrow

Evalesco Financial Services Level 17, 20 Bond Street Sydney NSW 2000
Phone: (02) 9232 6800

The information provided on and made available through this website does not constitute financial product advice. The information is of a general nature only and does not take into account your individual objectives, financial situation or needs. It should not be used, relied upon, or treated as a substitute for specific professional advice. We recommend that you obtain your own independent professional advice before making any decision in relation to your particular requirements or circumstances. Evalesco Financial Services do not warrant the accuracy, completeness or currency of the information provided on and made available through this website. Past performance of any product discussed on this website is not indicative of future performance. Copyright © 2019 Evalesco Financial Services. All rights reserved

Evalesco Financial Services Pty Ltd is a Corporate Authorised Representative (325313) of Australian Advice Network Pty Ltd.

ABN: 13 602 917 297 AFSL: 472901