Three things you may have forgotten to plan for in retirement

Retirement can be an exciting phase in your life. But all the recent changes to superannuation bring with them lifestyle and financial issues you need to be aware of as you plan your retirement.

Retirement means different things to different people. For some, it’s an opportunity to travel, to begin that project they’ve been putting off for years, or to just relax, spend time with the grandkids and dabble in their favourite hobbies. Retirement should be a time to relax and be free.

 

Plan smart for a stress-free retirement

Your retirement should be a time to free yourself from financial stress. Planning and good advice from a qualified financial adviser is the key to a trouble-free retirement.

If you’re considering retirement, there are issues you need to think about and plan for before you take the plunge. Here are three areas retirees commonly overlook in planning for their retirement:

 

  1. Have a re-contributions strategy

Our experience in talking to prospective retirees is that few have heard about a ‘re-contribution strategy’. So, we’d like to take this opportunity to explain what it is and provide some more detail.

Your superannuation entitlements comprise both taxable and tax-fee components. A re-contribution strategy is one where you withdraw your money from your superannuation account and re-contribute that cash back into your fund.

Why a re-contributions strategy may be important

Re-contributing all or part of your withdrawn funds back into your superannuation as a tax-free non-concessional contribution increases the level of tax-free funds in your superannuation account.

This reduces the tax payable on your superannuation pension if you dip into that pension while under 60 years of age. A re-contribution strategy can also lower the tax payable on benefits paid to your beneficiaries when you direct your superannuation benefit to your non-dependent beneficiaries following your death.

 

  1. Death nominations

A lot of retirees often forget death benefits are payable to your dependents or your estate from your superannuation fund upon your death.

There are four forms of death nominations which may be allowed by your superannuation fund.

You can make a binding death benefit nomination while you are alive. This is a written direction to your superannuation trustee establishing who you wish your superannuation death benefits to be distributed to.

Secondly, a reversionary nomination is where a superannuation fund member receiving an income stream nominates a beneficiary to whom the income stream will continue to be paid upon their death.

Thirdly, you can make a non-binding death benefit nomination guiding the trustee to whom you wish some or all of your superannuation death benefits is be paid to following your death.

Lastly, you may make a non-lapsing binding death benefit nomination directing your superannuation trustee to distribute some or all of your superannuation death benefits to your eligible beneficiaries or legal personal representative. This nomination remains in place unless you cancel or replace it with a fresh nomination or the superannuation trustee is aware your circumstances have substantially changed (e.g. you married, divorced or had a child).

Why a Death Benefit Nomination is important

If you don’t dictate how your superannuation death funds are to be distributed, the trustee of your fund has discretion who to pay your superannuation death benefit to in the event of your death.

 

  1. Ensuring your money will last and maximising Centrelink

Australia’s social security system is means tested. It is designed to act as a safety net. So, the higher your income or assets you have when you are assessed, the lower your Age Pension entitlements may be.

If your income or assets exceed the set cut off limits, you will not be eligible to an Age Pension at all. Hence Australians are expected to use more of our own savings to fund our retirement.

Currently, for every $10,000 of assets above the allowable Age Pension threshold your pension drops by $390 per year each if you’re member of a couple or $780 per year for singles.

Why ensuring your money lasts is important!

The more-heavy lifting your pension does, the less you’ll draw on your retirement savings. This is important as our increased life expectancies coupled with a turbulent investment environment make it challenging to ensure your retirement savings will go the distance.

 

Final observation

Planning your retirement can be complicated. As you can see from the above three issues, the various legislative frameworks are complex. While it pays to understand how retirement works, contact a qualified financial adviser to discuss your personal situation and retirement needs.

Thought about your insurance lately?

We’re all busy, right? Sometimes just knowing that you’ve got bills covered by setting up your bank accounts to automatically pay your mortgage, council rates and those other regular expenses gives you a peace of mind.

But what about those expenses that will inevitably vary as time goes by? Like your insurance.

Reviewing your insurance strategy is an often-forgotten activity, as many of us adopt that ‘set and forget’ approach outlined above.

When it comes to insurance, you should be regularly reviewing your policies to ensure that you are protected, and your coverage meets the needs of you and your family.

Here’s what you need to consider:

Do you still need insurance?

If you’ve ever been involved in a car accident, had a flight cancelled, become seriously ill or had an injury that has kept you out of action for any length of time, you’ll know how stressful these incidents can be.

If you have insurance, the cost of repairs, medical treatments, travel changes or recovery treatment can be softened. Insurance provides the money you need when things go wrong and, let’s face it, we all know that sometimes things can go dire.

When should you review your cover?

You should review your insurance strategy whenever there is a change for both   your personal or business circumstances. Changes in any of the following areas should prompt you to review your protection as they can impact the type and amount of insurance cover you need:

  • income
  • assets
  • debt levels
  • dependants
  • relationship status (for example marriage, divorce or a new partner)
  • occupation or employment status (for example if you become self-employed or employee)
  • health (improvements or change in health of you or your partner)


What if nothing has really changed?

You should still review your insurance strategy every year, even if nothing in your personal or business circumstances has changed.  Intense competition in the risk insurance marketplace means that insurance providers are always looking for the ‘edge’ with their products, particularly to ensure they remain as  the highest rated products.

This can often mean additional benefits, better policy definitions and the introduction of new additional options which can be of value to you if you need to make a claim.  While many insurers will automatically ‘pass back’ improvements in their policy definitions, this shouldn’t be assumed.

Next steps

It’s best to speak with your Bridges Lake Macquarie financial planner. They specialise in helping you understand the details of any policies you have, or that you are applying for. Contact us today!

Bridges Financial Services Pty Limited (Bridges). ABN 60 003 474 977. ASX Participant. AFSL No 240837. This is general advice only and does not take into account your objectives, financial situation and needs. Before acting on this advice, you should consult a financial planner.

Superannuation – start your strategy early!

Retirement and superannuation aren’t exactly at the forefront of a 20 or 30 year old’s mind – but we think it should be! Salary sacrificing more into your super now, could make a big difference later in life. An effective financial strategy is to vital in helping you achieve your goals and making most of the opportunities available. It’s never too early to start planning for the future.

So how do you do it?

Salary sacrificing is a strategy in which your employer takes some of your pre-tax salary and puts it into your superannuation fund – the ATO describes it as “an arrangement with your employer to forego part of your salary or wages in return for your employer providing benefits of a similar value”.

Rather than having your salary paid to you, you can have it paid into a superfund. If the sacrificed salary is made to a complying fund, it isn’t considered a fringe benefit. Another benefit, stated by the ATO is “if you make super contributions through a salary sacrifice agreement, these contributions are taxed in the super fund at a maximum rate of 15%. Generally, this tax rate is less than your marginal tax rate”.

This tactic not only increases the super you’re saving, but it also reduces the amount of tax you pay. Since the sacrificed income is not counted as assessible income (for tax purposes), it isn’t subject to Pay As You Go (PAYG) tax. Depending on your income, salary sacrificing could even drop you down a tax bracket!

The ATO has online resources for tracking your super, as well as helpful information on growing your super. They also recommend consulting the Fair Work Act 2009 if you’re considering salary sacrificing (here, you can find more information and check your entitlements).

Chatting with your loved ones and employer is also a good idea when considering salary sacrificing. However, to get the most out of your financial options and to fully understand the limitations that come with strategies like this, we recommend meeting with a trained professional.

Our friendly team are very experienced in their field and your initial consultation with them is free! Get in touch with us today.

Bridges Financial Services Pty Limited (Bridges). ABN 60 003 474 977. ASX Participant. AFSL No 240837. This is general advice only and does not take into account your objectives, financial situation and needs. Before acting on this advice, you should consult a financial planner.