Retirement Planning

What are some strategies
when preparing for retirement?

For the majority of retired Australians, their sole support is the Age Pension. If you want to maximise the post-retirement lifestyle, pre-retirement planning is imperative.

Given the continuing improvement in life expectancies (increasing about 1 year every 4 years), many people now aged over 50 can expect to live well into their 80s and 90s. This large amount of time is similar to their working lifespan – it’s a long time retired!

A major consideration for people approaching retirement is what savings are required to keep them in the lifestyle to which they are accustomed…

For a ball-park estimate, try these calculators:

• How much do you need to retire comfortably? (a very basic calculator!)
• ASIC calculators: Retirement planner; Account-based pension calculator
• Retirement calculators
  • How much do you need for your retirement?
  • How long will your money last?

Note Archimedes Financial Planning has developed a proprietary calculator that makes it very easy to analyse these matters!

Review the full list of services we provide.

At this stage in the financial planning journey, matters to consider include:

• consolidation of superannuation accounts
• asset allocation: striking the right balance for risk versus reward
• re-contribution strategies
• allocated and market-linked pensions
• Transition-to-Retirement strategy.

There can be substantial tax benefits in maximising super and then converting to Transition-to-Retirement (TTR) allocated pension or market-linked pension.

These may be suitable if a person is over 55 and continuing to work, as this pays an income stream with the advantage of a 15% tax rebate. It enables people to reduce their take-home employer income and increase salary sacrifice to super.

The end effect is a reduction in income tax that would have applied at your marginal tax rate if had taken the full salary as income. Here's a brief case studt:

• Current Strategy
  • person aged 55 earns $100,000 pa and requires $53,000 pa living expenses
  • has $300,000 in super and is currently salary sacrificing $30,000 pa
  • accumulation super earns 6.8% pa
• Transition-to-Retirement
  • starts TTR allocated pension earning 7.8% pa and paying $30,000 pa
  • increases salary sacrifice to $67,000 pa which gives same net income as Current Strategy

The results are shown in the chart.

The Transition-to-Retirement strategy is projected to increase the person’s wealth by about $20,000 at age 60 or $65,000 at age 65.

It may seem a no-brainer to start the Transition-to-Retirement strategy.

However, at Archimedes Financial Planning, we explore this decision in more depth, considering:

• what is the benefit if stop work well before age 65?
• should the TTR allocated pension draw the minimum, maximum or some intermediate amount?
• what is the projected difference using different risk profiles?
• how does a TTR allocated pension affect superannuation preservation status?
• what is the effect of waiting to age 60 when payouts are tax-free?

Analysing these matters can throw a different light on the merits of starting a TTR allocated pension…

In summary, at Archimedes Financial Planning we develop integrated retirement planning strategies that put you in the position of deciding how best to proceed.