Retiring sooner or later

Here we look at how you can maximise your income in retirement, whether you’re:

  • a long way off retirement
  • close to retirement; or
  • already retired.

Retirement still more than 10 years away

Retirement can seem irrelevant when you’re in your 30s or 40s. There are so many other things to do with your money – going overseas, getting a house, raising a family, or just having fun.

However, according to research by the Investment and Financial Services Association (IFSA), the Age Pension won’t be nearly enough to fund the lifestyle we’d like when we’re no longer working. So the best thing to do is to start saving now.

Common questions to consider

  • How much do I need to retire on?
  • What is the best way of funding my retirement?
  • Is retirement too far off to start worrying now?
  • What should my employer be contributing towards my superannuation?
  • Is the Super Guarantee Contribution enough to fund my retirement?
  • What is salary sacrifice?
  • Why are women recommended to make higher extra super contributions than men?
  • How do I know which fund to put my superannuation in?
  • My super is sitting in a few different funds. Is it worth moving it?

Retiring within the next 5 – 10 years

The combined effect of earlier retirement and living longer means that many Australians will spend more than a quarter of their life in retirement. While this sounds like good news, it does emphasise the importance of planning carefully – and well in advance – for your retirement.

Common questions to consider

Some questions you may wish to consider include:

  • How much do I need to retire on?
  • When can I access my super?
  • What are my options when I retire?
  • Will I pay tax on my super if I take a lump sum?
  • Is there any benefit in taking my superannuation as an income stream?
  • Am I eligible for the Age Pension?
  • How does the Income Test affect eligibility for the Age Pension?
  • How does the Assets Test affect eligibility for the Age Pension?
  • What is deeming?
  • Why are income streams treated differently?
  • What are the different types of income streams?

Already retired

If you’ve already reached retirement age, you may feel you’re not yet ready to give up work altogether. If you’re eligible for the Age Pension, the government offers incentives for working people to defer claiming it. On the other hand, if you’ve independently funded your retirement, you may benefit from keeping track of, or restructuring, your finances so you maximise any government entitlement.

Common questions to consider

Some questions you may wish to consider include:

  • I’ve already retired. Isn’t it just about living off what I’ve managed to save now?
  • I have been retired for two years. Isn’t it too late to change my financial arrangements?
  • What is the Pension Bonus Scheme?
  • What are the eligibility requirements for the Pension Bonus Scheme?
  • How much is the Pension Bonus Scheme and when is it paid?
  • Apart from social security benefits, are we eligible for anything else now we’ve retired?
  • Now we’ve retired should we move house?

Income In Retirement

When you stop full time work, it doesn't mean your income stream has to stop as well. During your working life, you have accumulated savings - largely in superannuation. Stopping full time work allows you to access those savings.

If you are retiring your superannuation may be available to you either as a lump sum or an income stream (pension).

Following the introduction of Simpler Super in July 2007, there are only 2 types of income stream options available from superannuation.

  • Account based pensions (effectively replacing allocated pensions and term allocated pensions).
  • Non-account based pensions (replacing complying annuities).

How to structure your retirement income stream will depend on your individual situation, so it's important you get professional advice.

Transition to Retirement(TTR)

Transition to Retirement income streams were introduced on 1 July 2005, and allows people over 55 to access their superannuation without fully retiring. It's a new limited condition of release for superannuation.

Transition to Retirement strategies can be a tax effective way of generating additional cashflow for a person who wants to reduce their working hours without compromising their lifestyle.

 What to do next

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Retiring sooner or later