Moving on?

Financial planning services are provided by Bendigo Financial Planning LimitedMoving On

Most of us have big plans for retirement and how we'll spend our time when we're no longer working. You may want to travel, try new hobbies, volunteer, take up golf, lunch with friends or even return to study.

With careful planning, your retirement should include some of the best years of your life.

How much money do I need to retire?

Step 1

A bit like setting up a budget, think about what you currently spend to fund your lifestyle at the moment.

Identify those costs that will continue if you were to retire – food, entertainment, bills, rates, rent, health insurance, car insurance, etc.

Then eliminate any costs you will no longer need to cover. For example, you may be in a position where you will no longer need to make home loan repayments.

You can add to this list any new costs that will come with retirement, including travel and maybe a new car.

Step 2 Estimate as best you can how long you will live in retirement. Obviously this will be hard to answer, but you can consider factors such as your retirement age and health.
Step 3

You and your Bendigo Financial Planner are now in a position to estimate how much money you think you'll need to retire, and invest it appropriately.

Timeline to retirement

Once you've estimated how much money you need in retirement, you will need to start putting strategies in place to help you reach your target.

Short-term

You're about to retire

If retirement is just around the corner for you, you'll probably want to consider more stable investment options.

Fixed interest investments with a bank or other financial institution provide the security or agreed returns.

It's also worth evaluating the options open to you via your superannuation – and don't forget to explore any Centrelink payments you may be eligible for.

Medium-term

You hope to retire in five years

If you're planning to retire from full-time work in around five years, it may be worth considering a mix of investments across local and international shares, property, fixed interest and cash.

You may also wish to contribute additional funds to your superannuation, or even take advantage of transition to retirement strategies.

Long-term

Retirement is five years or more away

With your retirement still some time away, you have the luxury to consider investment in higher risk options, including the share market, where length of time in the market is important.

As always, when you work with a Bendigo Financial Planner they'll measure and consider the level of risk you are comfortable with and recommend an appropriate investment strategy.

I'm preparing to retire – what else should
I think about?

Contributing to superannuation: A limit of $150,000 per year applies to after-tax superannuation contribution. Those under 65 years of age can bring forward two years worth of contributions, giving them a limit of $450,000 over three years. For those who are eligible to make before-tax superannuation contributions, a limit of $25,000 per year applies. Those over 50 years of age can contribute up to $50,000 per year until 2011/12.

Any contributions over these limits are taxed at the top marginal tax rate plus the Medicare Levy.

Transitioning to retirement: If you're over 55 years, you can choose to take advantage of transition to retirement strategies. This allows you to cut your working hours but maintain your income level by taking a regular income from your superannuation.

Making deductible superannuation contributions: For those who are eligible, a tax deduction may be claimed on any before-tax superannuation contributions.

Maximising Centrelink entitlements if you work past retirement age: If you've chosen to work past retirement age and meet the eligibility criteria, you may qualify for the Work Bonus through Centrelink.

Transition to retirement: If you're not yet ready to plunge into retirement full-time, a transition to retirement strategy provides a flexible way for you to dip your toe in, reduce your workload and supplement your income – all while saving tax.

Most people start to think about retiring when they reach their 50s. And for most, the thought of retirement comes with mixed emotions. Some are nervous, fearing boredom and a loss of purpose. Others fear they may not have enough money to retire on. So getting organised early, and exploring all the options available to you should be a priority. Using a transition to retirement strategy can help you move seamlessly from work to retirement.

  • On reaching your preservation age, you can establish a superannuation pension that allows you to maintain or reduce your work hours
  • Transitioning to retirement can help you reorganise your finances in preparation for full retirement, help you maintain your income and take advantage of the tax concessions available
  • The investment earnings and capital gains within transition to retirement pensions are effectively tax free. For instance, while your transition to retirement pension may be taxed at your marginal rate, you may be entitled to a tax offset of up to 15% of that income
  • If you're 60 years of age or older, you won't pay any tax on the income you receive from a pension drawn from a previously taxed source
  • A transition to retirement strategy can also help you supplement your superannuation savings in the lead up to full retirement. This works because it allows you to sacrifice a greater percentage of your pre-tax salary into your superannuation.

Of course, this information provides only an overview of the transition to retirement strategy.

Make an appointment with a Bendigo Financial Planner.

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