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What are you expecting from your retirement?Retirement.png

As you begin approaching retirement, or start thinking about it, inevitably you’ll have an ideal picture of what that might look like. You and your spouse travelling across Australia, setting up day-care for the grandkids or perhaps focussing on that veggie garden you always wanted.

As John Lennon said, “life is what happens when you are busy making other plans” and what we picture for our retirement may not be the reality. Life does get in the way, but we have some ideas to help you prepare. Below are some of the obstacles and opportunities we’ve helped our clients with as they approach retirement, or are already there.

Downsizing the family home

If you meet the criteria and are ready to sell your family home, Downsizer contributions could be a great way to free up some cash and help you increase your income during retirement.

The Downsizer rule allows you to put some of the proceeds of the sale of your home into your super, without penalties for breaching the contribution caps. Currently, if you’re over 65 you can contribute up to $300,000 if you’re single, or $600,000 as a couple. There is a proposal to lower the age to 60 in the 2022/2023 financial year.

Contributing these funds to your super is a great way to boost your retirement funds and increase your income when you retire. One thing to watch out for is that your super is considered an asset by Centrelink so this could reduce your Age Pension entitlements.

Transition to retirement

A Transition to Retirement (TTR) strategy may help those who want to reduce their working hours while still maintaining a similar level of income. This is available to those who have reached preservation age (the age you can retire). 

To begin a TTR, you’ll need to open a TTR pension account alongside your super account. The good news is that while you’re drawing on your super as income, you’re still contributing to your super and helping it grow via the super guarantee payments from your employer. And you can continue to make your own contributions if you wish.

Age Pension Entitlements

There are a variety of scenarios that allow access to the Age Pension. How much you will receive depends on your assets and income. One of the big changes we see with clients at pension age is when the younger spouse reaches Age Pension age. At this stage, you may find big changes in your income as the move from an employed wage to that of the Age Pension and payments from allocated pension and/or annuities.

It’s important to speak with your Financial Advisor before this event happens. We can work with you to understand your cash flow needs, and how we can maximise your Age Pension entitlement.

Receiving an inheritance

According to the Grattan Institute, more than 80% of inheritances are received by people aged 50 and over. While it may seem like a fun and good idea to spend, spend, spend when you receive a financial windfall, there are some smart ways to utilise this money.

We suggest talking with your Financial Adviser to see how this windfall can help you achieve your retirement goals. There are ways of safeguarding the money for your retirement such as through super contributions, annuities or investments.

Changes in your relationship

The effects of divorce, death of a partner or finding a new partner can be financial as well as emotional.

Moving from two incomes to one can be challenging, mortgages, bills and council rates don’t halve just because you’re on your own now. However, you may be eligible for an increase in your Aged Pension, or you can increase the amount paid to your from your allocated pension. If your partner has passed away, you may be the beneficiary of assets and insurance payouts. Both of these changes may affect your pension eligibility.

Equally challenging can be merging your finances with another person, especially if you have been relying solely on yourself for a long time. Keeping your finances separate and sharing expenses can be one way to combat this however, if you are receiving the Age Pension then your partner’s income and assets need to be declared. This may affect how much you receive.

There are ways we can assist with maximising your Age Pension, talk to us if there is a change in your relationship status.

Conclusion

Whatever life may throw at you, your Financial Adviser can help. You should contact us whenever there is a change in your circumstances, we can help you make the most of any change or opportunity.

It is very important that you understand that the information above is general in nature and does not take into account your personal situation. You should consider whether the information is appropriate to your needs, and where appropriate, seek professional advice from a financial adviser. It is also worth noting that the Australian financial and taxation system is ever-changing, and the information above may no longer be relevant. Again, we suggest seeking professional advice from a financial adviser before proceeding.

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