Australian Retirement Planning – Things To Consider

We all have to deal with the inevitable evil of retirement planning at some time in our lives. When preparing for retirement, Australians need to keep a few things in mind.

Before taking any action, you need to consider a few factors. Some of the most important things to think about when making retirement plans in Australia will be covered in this article.

So if you're interested in learning more, keep reading! Everything from healthcare and living expenses to taxes and pension payments will be covered. You ought to clearly understand what to anticipate during your retirement years in Australia by the end of this article. ​

To make the most of your retirement years, it's vital to familiarise yourself with the requirements in your country as the laws and regulations governing retirement planning vary from one to another.

Without further ado, let's look at some of the crucial elements you should consider when making retirement plans in Australia!

Many Australians must consider some difficult decisions when it comes time to retire. How much cash do you require? What kind of lifestyle do you envision? How can you maximise the years you have left in retirement?

This blog post examines several important factors to consider while making retirement plans in Australia. Read on for helpful hints and advice whether you're just beginning to plan or are already retired!

Do you have retirement plans? Do you know somebody who is, or else? The alternatives available to Australians for retirement planning might be overwhelmingly diverse.

This blog post will detail some of the important factors to take into account when deciding how to spend your retirement. Read on for helpful information whether you're just beginning to consider it or are close to retirement and need some assistance narrowing down your options.

Maybe you've already retired and are discovering that your savings don't go as far as you'd like them to. Australians in or near retirement should carefully assess their financial options regardless of where they are in life. This post will discuss some important issues to consider while making retirement plans in Australia.

Australia is a desirable location for retirement due to a number of factors, including its robust economy and lovely environment. Before acting, you should take into account a few other factors.

For instance, you should ensure you have enough money saved to meet your expenses because Australia's healthcare system can be pricey. You should factor in Australia's high potential cost of living when creating your retirement budget.

You may ensure that your golden years are everything you dreamed for by familiarising with Australian retirement planning fundamentals!

So let's get started by reading!

A Vision For Your Retirement

The first and most important step in preparing for your retirement is having a clear idea of your life after working. Imagine yourself in retirement; fishing and golf are fine side hobbies, but how will you pass the extra 40 to 50 hours you used to spend at work?

Be prepared for something else to take the place of the psychological and social benefits that work environments offer. Does this refer to volunteerism or part-time employment? Unfortunately, a lot of people underestimate the drastic toll quitting a full-time job has on their social health.

Will you be eating on caviar and enjoying the finer things, or will you be leading a simple life with yearly trips abroad or within your own state?

Making financial preparations to support these objectives will be possible after you clearly understand your retirement vision.

Estimate Your Retirement Expenses

According to The Australian Super Fund Association, knowing the "magic number of funds you need to achieve the lifestyle you want is the million-dollar question or $640,000. (ASFA).

Use the Moneysmart retirement planning calculator provided by the Australian Government to begin calculating how much you'll need.

In addition to the income you're expected to have from superannuation and the Age Pension when you retire, the calculator helps you determine how contributions, investment options, fees, and retirement age affect your retirement income from superannuation.

The additional sum you believe you'll need to fund your ideal retirement is simply added to the income calculation; this is your "Magic number."

Your key number is, therefore $64,000 if your yearly income from super and the Age Pension is $60,000 and you intend to take a trip to Noosa every winter, which is expected to cost an additional $4,000.

Start Boosting Your Super And Your Savings

Increasing your super contributions as you get closer to retirement is the first step in trading some short-term discomfort for some long-term gain. The more opportunity you have to create investment gains, which benefit from compounding, the larger your super balance.

Payments made in lieu of wages are supplementary super contributions made before taxes. A percentage of your salary is directly paid by your company to your super. This may cut your tax rate and lessen your taxable income, which are two further advantages.

Similarly, after receiving payment, you might increase your super. Any amount up to $100,000 can be paid, with no cap on annual payments. Since you're not obligated to make recurring payments, you can make them whenever it's convenient for you or perhaps when you have some extra money.

If you are 65 years of age or older and have owned your property for ten years or more, you may be able to transfer up to $300,000 from the sale of your primary residence into your retirement account.

Transition to Retirement

When you reach your preservation age, you should reduce the number of hours you work and instead rely on your superannuation to supplement your income.

Pensions are undergoing change. As more of us elect to keep working into traditional retirement ages, the practise of "hanging up the spurs" at the traditional age of retirement is becoming less and less prevalent.

The good news is that you can create a flexible Transition to Retirement Income Stream after you reach preservation age to access your super for additional income and benefit from some tax breaks (TRIS).

It is an excellent strategy for working fewer hours while keeping the same income, or working the same amount of hours while utilising the additional regular money to raise your super before you even consider retiring. Either way, it is a win-win situation.

1. Decide what you want to do with your extra money

An income stream for the transition to retirement can be a terrific approach to:

Increase your super, pay less tax, and keep your job hours the same

A TRIS can be an excellent method to maintain your take-home earnings and top off your super if you intend to remain working. Additionally, your TRIS payments are tax-free once you turn 60.

Reduce your workload without losing money

Adding a TRIS to your income can reduce your working hours without fear of losing your current salary.

Before retiring, pay off your debt.

Continue working and use TRIS's cash infusion to pay off your outstanding debt.

2. Making the switch to a retirement income source

This hypothetical situation is predicated on a 60-year-old with a $60,000 annual salary and a $200,000 starting super balance. The Transition to Retirement Income Stream receives the entire balance at first.

This is predicated on existing laws and product regulations and makes the following assumptions:

• During 2021–2022, employer contributions (SG) are 10% of salary.
• The maximum on concessional contributions for 2021–22 is $27,500 annually. Before starting the transition to the retirement approach, Pat hasn't implemented any pay sacrifice.
• Contributions made through salary sacrifice and SG plans are taxed at 15%.
• From the age of 60, pension payments from an income stream for the transition to retirement are tax-free.

Please be aware that the scenario is based on financial and investment situations as of July 1, 2021, as well as on existing tax and super laws, inflation, and interest rates.

This case study, which includes general data and financial estimates based on future assumptions, is being used as an example. The results may vary depending on the veracity of these hypotheses, your situation, and other factors.

It doesn't consider your goals, financial condition, or needs. You should take the facts into account in light of your specific situation. If you need financial advice that takes into account your situation, it is advised that you speak with a financial advisor.

You can determine the level of counsel you might need to get what you want by having a free introductory conversation with a financial planner.

The cost of comprehensive guidance varies according to the complexity of your financial problems and is delivered on a fee-for-service basis. Your account may be used to deduct fees for thorough counsel on your super account.

3. Things to keep in mind

You must be aware of the usage guidelines in order to determine whether a Transition to Retirement Income Stream is appropriate for you. These consist of:

• In general, lump sum withdrawals are not permitted.
• Each year, you must get between two and ten per cent of your TRIS balance.
• Drawing from your retirement fund now could result in a lesser balance when you reach full retirement age.
• Your TRIS payments will be taxable while you are under 60 years old; any taxable portion will be taxed at your marginal tax rate less a 15 per cent offset. You don't pay tax on superannuation income payments after age 60.
• The same favourable tax treatment is applied to your TRIS earnings as it is to your super earnings, which are subject to a maximum tax rate of 15%.

Eight Ways To Boost Your Super

1. Take a look at less cautious investment options

The rate of return you receive on your investments is influenced both by the level of risk you expose yourself to and the length of time you keep your money invested.

The returns on assets with a higher level of risk, such as stocks, significantly outweigh those on investments with a lower level of risk, such as cash and bonds. If you still have ten years or more until retirement, or even if you don't but you expect to live a long life, you can afford to take on more risk because you will have enough time to weather any short-term market changes that may occur. If you don't have ten years or more until retirement, you should stick to lower risk investments.

2. Combine the accounts

If you've had multiple jobs throughout the course of your working life, you might have more than one super account.

By consolidating all of your retirement funds into a single account, you may be able to reduce the amount of annual fees you are required to pay. You will have more money with the reduction of fees, allowing you to put more effort into saving for your retirement.

Consolidation could wind up costing you money in a number of different scenarios, depending on the particulars of your circumstance. You have the option, for instance, of keeping a second account in order to keep your insurance coverage or to gain particular tax advantages. However, when choosing a retirement savings account, you should also keep in mind that performance and other essential aspects are important considerations to take into account.

3. Discover the super

Have you ever worked and are confused about whether you received super? Check for misplaced or unclaimed super immediately online at the Australian Taxation Office (ATO) website.

4. Examine your super

When your super fund sends you an annual statement, make it a practise to review your super. Examine the costs, your investment choice, and the long-term profits.

Are you receiving your money's worth? Do the returns currently satisfy your retirement goals? If not, evaluate your options to see if you can find a better one.

5. Benefit from the low-income superannuation tax offset

If you are eligible for the low-income superannuation tax offset (LISTO) that the government provides, money will be transferred into your super account. The qualifications for this offset include that you must have an adjusted taxable income of up to $37,000.

The LISTO will contribute an amount equal to 15% of those amounts, up to a maximum of $500 in pre-tax or concessional contributions that have been made to your account. Just double check that your social security number is listed on the fund.

6. Contribute voluntarily

The act of voluntarily giving up part or all of one's salary may give the impression of generous giving, but in reality it is quite the opposite.

You will come out ahead if you have your employer "sacrifice" some of your salary before taxes so that it can be deposited into your retirement account.

This is because you contribute more money to your superannuation account at the same time as you pay tax on the "sacrificed" amount at a concessional rate of 15% (or 30% for high-income workers). The reason for this is because superannuation contributions are taxed at a concessional rate.

With this concessional tax rate, you are able to make annual contributions of up to $27,500. This amount does not include the 10% super guarantee payments that are made by your employer.

In addition, you are able to make contributions to your retirement fund after taxes have been deducted. These contributions are referred to as "non-concessional contributions" due to the fact that you are unable to claim a tax deduction for them.

On the other hand, any investment earnings that you make after your money is in super are normally taxed in a more favourable manner than earnings that are made outside of super, which causes your savings to grow at a quicker rate.

7. Contribute with your spouse

If your spouse or de facto partner earns a modest salary or has been out from the job for an extended period of time, you may want to give some thought to making a super payment on their behalf.

There is a tax benefit of 18% for contributions of up to $3,000 that are made. As a direct consequence of this, the largest possible tax refund is $540.

8. Think about switching to a retirement plan

If you have already reached your preservation age, switching to a retirement pension strategy may provide you the opportunity to have your cake and eat it too (55 to 60, depending on when you were born).

Because of this, you are allowed to keep working while also withdrawing money from your retirement account. If you combine the strategy of salary sacrifice with the accumulation of your super, you may do both at the same time.

Because of the limits placed on the amount of money that can be invested and withdrawn, you should consult with an expert before getting started.

Downsize Your Home, Upsize Your Retirement

The financial advantages of reducing your home are obviously advantageous. Reduce your insurance and utility costs, release equity, and cease investing in property maintenance.

That results in less time being spent on property upkeep. Forget about trimming the yard, fixing the leaky faucet, and the rest of the maintenance "to do" list.

Finding a property that fits your retirement lifestyle counts as downsizing, not moving to a retirement village. a residence suitable for the stage of life you are presently experiencing.

It is a place where residents may actually live independently while interacting with others who share their interests and are at a similar stage of life. No renters live next door, too!

You won't need to spend money on things like a weekly gym subscription, movie tickets, bowling dues, and much more when you downsize to a lifestyle community since there are world-class, award-winning facilities just outside your door.

Additionally, you have the freedom to lock up, leave, and travel whenever you choose when you downsize to a lifestyle community. When you're away, there are community managers on site to keep an eye on things.

Government Benefits and the Age Pension

When you reach the age of retirement, you may become eligible for benefits from the government such as the age pension or a concession card.

In general, the type of pension and benefits for which you are entitled are determined by factors such as your age, assets, and income.

1. Age Pension

For the most part, in order to qualify for the Age Pension, you must:

• depending on when you were born, you need to be at least 66 years old. You also need to have been an Australian resident for at least 10 years
• attain the required levels of both income and assets
• checks for one's income and assets

Tests for assets and income

These assessments look at both your earnings (how much money you bring in) and the value of your assets (how much those assets are worth) (what you own, for example, any investment properties).

If your annual income or total assets are greater than a certain limit, you may find that you are not qualified for a pension at all.

Your income comes in part from the following sources:

• employment
• pensions
• annuities
• investments
• earnings outside Australia
• salary packaging

Among your possessions are things like:

• investment properties
• caravans, cars and boats
• business assets

If you choose to make your home in the family home, it is not regarded an asset. If you decide to sell, however, there is a possibility that doing so will have an effect on your pension.

The worth of your overseas possessions will be determined and then converted to the equivalent amount in Australian dollars.

How much money is provided by the Age Pension

Your income, assets, and marital status are taken into account when determining how much you receive.

The highest Age Pension is:

• singles is $868.30 a fortnight or $22,575 a year
• couples is $1,309.00 a fortnight or $34,034 a year

Supplements are not included in these amounts.

Age Pension benefits

If you are eligible for the Age Pension, you may be able to take advantage of the following benefits:

• Centrepay is a free service that automatically deducts money from your Centrelink benefits to pay your bills.
• Work Bonuses are payments that enable you to increase your income without affecting your pension.

2. Various other pensions

Visit income support on the Department of Veterans Affairs (DVA) website for details regarding veteran pensions.

Use Centrelink's Payment Finder for additional benefits, like as carers' allowance.

3. Concession Cards

The following credit cards offer senior adults, retirees, and pensioners savings on a variety of services, including utilities, transportation, and medical care.

Pensioner Concession Card

provides you with access to reduced costs for utilities and medical care, in addition to, in some areas, discounts on public transit fares. You are required to:

• be at least 60 years old, and
• receive payments from Centrelink, such as the Age Pension and others.

Seniors cards

Offers a price reduction on some purchases of goods and services, in addition to savings on travel costs. In most cases, you will need to:

• be at least 60 years old, and
• spend your week working fewer than 20 hours.

Verify your state's or territory's eligibility here:

• Australian Capital Territory
• New South Wales
• Northern Territory
• Queensland
• South Australia
• Tasmania
• Victoria
• Western Australia

Commonwealth Seniors Health Card

Reduces the cost of your prescriptions and doctor visits. You have to:

• be eligible for the Age Pension,
• pass a test based on your salary, and
• not be eligible for benefits from Centrelink

4. Government Loans

You might be qualified for Services Australia loans if you receive or are eligible for the Age Pension:

• Pension Loans Scheme — You can supplement the income you receive from retirement by taking out a loan secured by real estate on a biweekly basis.
• Advance payment — Get a portion of your pension payout in advance so that you can better manage your current financial obligations.

It's a Big Decision to Leave Full-Time Employment; Don't Do It Alone

Even while it may be invigorating to settle into life after work, there are many things to think about in this transitional period. There are a lot of different aspects to take into consideration, some of which include maximising whatever entitlements you have to Centerlink, asset allocation, income streams, estate planning, tax benefits, and lump sum payments.

We provide multiple degrees of help and guidance in order to assist you in making the decisions that are most appropriate for your circumstance.

Easy Retirement Tips

We are all aware that planning for retirement may be a challenging endeavour. As a member of Aware Super, you have access to honest financial advice regarding your super, retirement income stream alternatives, and insurance with us.

Advice on more complicated issues

When it comes to preparation, getting sound financial guidance can make a significant difference. One of our fully experienced financial planners is able to provide assistance, for a fee, with guidance that digs into topics such as the age pension and other government entitlements, investing outside of super, optimising tax breaks, and developing a strategy for the transition to retirement.

What You Should Do When You're Almost Ready to Retire Completely

Financial guidance can be quite helpful when making plans. One of our fully licenced financial planners can provide assistance for a fee with guidance regarding topics including the age pension and other government benefits, investing outside of super, maximising tax incentives, and creating a strategy for transitioning to retirement.

Healthcare Benefits

You may be eligible to receive financial assistance from the government in the form of these benefits.

• Medicare Safety Net — after you have reached a specific spending threshold, your out-of-pocket costs for seeing doctors will be reduced.
• PBS Safety Net — after you've achieved a particular amount of prescriptions, it gets cheaper for you to buy drugs.
• Free vaccinations — vaccines against the flu and pneumococcal illness that are provided at no cost.
• Cancer screening — screenings for breast and colon cancers at no cost as part of an early detection programme.
• Free annual health assessment — if you are 75 years old or older (or 55 for Aboriginal and Torres Strait Islander peoples). It is possible that you will be required to pay the gap if your doctor does not participate in bulk billing. Ask your GP.
• Free home medication review — If you take more than five different prescriptions each day, you may need assistance with administering your drugs at home. Inquire with your family doctor or pharmacist.

Tax Offsets

Depending on the following factors, you can be eligible for additional tax offsets:

• age
• income, and
• qualifications for receiving government pensions

On the website of the Australian Taxation Office (ATO), you can learn more about the seniors and pensioners tax offset.

Seek Financial Advice

To make a little, you sometimes have to spend a little. The last thing you want to do is blow your nest egg because you have worked so hard.

obtaining guidance on controlling your super, realising your entitlements, controlling your investments and debts, and assisting in tightening up your spending.

You can feel assured that your retirement plans are feasible by working with a financial advisor to develop realistic financial goals.

Living the dream is having the lifestyle of one's choice for many Australians.

Whatever form your retirement dream takes, with the correct preparation, outlook, and guidance, you can go forwards each day with the confidence that you are making progress towards greater financial independence and your own personal version of the great Australian retirement dream.