Retirement - Planning for the future

Statistics show that Australians who are approaching retirement are wealthier, healthier and face a better future than ever before. You are likely to live longer and have a higher standard of living than your parents did. This is exciting news for many, and something to plan for and look forward to.

All retirees have different expectations for their retirement. Whatever your expectations may be, fulfilling them will require effective wealth management and planning to help achieve a secure and comfortable retirement.

Questions that are often asked are:

• When is the best time to retire?
• Will I be returning to the workforce again?
• How many years of retirement do I need to plan for?
• How much money do I need to have accumulated to deliver the retirement income I need?
• Before I retire, how important is making the most of my super contributions, the investment assets and funds that my super is invested in?
• What are my options for when I do retire?
• Is it best to leave my money in super in retirement or use an income stream product?
• Should I consider using a Self Managed Super Fund?
• Are my current investment assets, superannuation and non-superannuation, working effectively and are there better alternatives?
• Should a complete review of our current financial position and investments be undertaken?
• How important is tax planning pre & post retirement?
• What are the benefits of "transition to retirement"?
• Is help needed in relation to estate planning issues?

All of us will have questions when it comes to planning ahead for a comfortable retirement, it is never too early to meet with an investment advisor to fully review and discuss your current position and your future plans and requirements.

In the 2006 Federal Budget the Government announced significant changes designed to simplify and streamline superannuation. Some of the changes took effect in 2006/2007, but most took effect from the 1st July 2007.

Key changes in relation to retirement included:

• No tax after age 60 from a taxed superannuation fund, regardless of whether you take your benefit as a lump sum or convert it to an income stream.
• Reasonable Benefit Limits (RBLs) abolished so there's no longer any penalties for accumulating large amounts in super.
• You can stay in super for as long as you like, there is no longer a requirement to cash out of super after age 65 if you're no longer working (this took effect 10th May 2006).
• Tax component changes. If you are able to and choose to access your super prior to age 60, there may be a tax liability. But now there are only two tax components: a Tax Free Component and a Taxable Component.
• Pension minimums are calculated differently and there's no longer a maximum. The minimum amount you need to take from your pension product is generally now calculated as a percentage of your account balance based on age and for most pension products now, there is no maximum annual payment limit.
• Death benefits as pensions can only be paid to tax dependants.
• Centrelink changes to pension assets test taper rate. From 20th September 2007, the rate will halve, meaning people previously unable to access the Age Pension may in fact be able to.
• New contribution limits within superannuation, please refer to our superannuation pages on our website for more information.

How much money do you need in retirement?

The most accurate way of assessing your retirement income needs is to work out a realistic expenditure budget. However, a good rule of thumb is approximately 60% to 75% of your pre-retirement income.

When is the best time to retire?

Choosing the right time to retire can have a significant effect on your future retirement accumulated wealth.

If your retirement is by choice and not due to illness or being forced to leave work early, then choosing the right time becomes very important. It is important to plan your retirement so that you achieve your goals and ensure that you have enough funding to provide you with a comfortable living during your retirement years.  It is important to assess how much you would require in retirement and how to achieve this goal, by either working longer or increasing the amount you save each year and using the  most tax effective method for increasing your assets.Choosing the right time to retire during the financial year year is also important as it can result in a higer amount of tax to be paid as you may receive additional retirement bonus payments or long service leave.

Investing for a better future

Before and after you have retired it is essential that your investment capital is working correctly for you. This means making the right investment decisions prior to and after you retire. It means making certain that your capital is working in the correct investment assets and investment vehicles both pre & post retirement. For example having your capital invested incorrectly can mean a great difference in the end value of your accumulated capital.

Creating a retirement income

This will be a very important decision for you, one where it is important to sit down and discuss with an investment advisor, since there are many choices that will be available for you to consider.