Are you over 60 and unsure if you have enough in your retirement savings?
Do you feel like you are running out of time to build a comfortable nest egg for your golden years?
If so, you are not alone. Many Australians in their 60s face the challenge of saving enough for retirement, especially after the impact of the COVID-19 pandemic on the economy and the superannuation system.
However, it is not too late to boost your retirement savings. There are still some strategies that you could consider to accelerate your savings and make the most of your remaining working years.
At Unbound Financial, we can help you with these strategies and provide you with personalised and professional advice and support.
Some of the strategies that we can help you with are:
Taking advantage of a transition to retirement (TTR) strategy:
A TTR strategy allows you to access some of your superannuation while you keep working. The main reasons are as follows.
- To supplement your income if you reduce your work hours so you can ease into pre-retirement without the financial pinch.
- To save on tax while you keep working full time so you can more effectively boost your retirement savings.
- To provide extra income or a lump sum to help pay off high interest debts to save on interest and retain more income for retirement.
The TTR salary swap.
If you are 60 or older, TTR pension payments are generally tax-free, which means you could potentially save more for retirement by salary sacrificing (when you and your employer agree to pay a portion of your pre-tax salary as an additional contribution) to your superannuation. The reduction in your cashflow could then be made back up with an optimal amount of tax-free income from a TTR pension as per the example below.
*This is an approximate based on the 2023/2024 marginal tax rates and does not account for the Medicare levy
^Tax of 15% applies to each concessional super contribution, which is lower than the tax bracket in this scenario
**Total income and superannuation tax payable $9,752 versus $13,217
Depending on your needs and situation, this can be a more efficient way to fund your lifestyle and boost your retirement savings.
Reviewing your super investments: The way you invest your super can have a significant impact on how much you will have at retirement. Depending on your risk appetite, time horizon, and goals, you may want to review your investment options and make sure they are aligned with your needs and preferences. Generally speaking, the closer you are to retirement, the more conservative you may want to be with your investments, as you have less time to recover from any market downturns. However, this does not mean that you should avoid growth assets altogether, as they can still provide higher returns over the long term.
Maximising your super contributions: You can make extra contributions to your super up to certain limits each year, which can help you grow your super balance faster.
There are two types of contributions with separate annual limits:
| Type of contribution | Examples | Benefits and opportunities |
|---|---|---|
| Concessional (before-tax) contributions. Â 2023-2024 limit $27,500 pa |
Personal tax-deductible contributions to reduce tax or offset Capital Gains Tax  Employer and Salary sacrifice contributions. |
As these contributions are paid from pre-tax earnings, they reduce your taxable income. Â You may be eligible for a higher limit by carrying forward any unused contributions from the previous 5 financial years if you meet the balance, age and contribution requirements. |
| Non-concessional (after-tax) contributions  2023-2024 limit $110,000 pa |
Regular payments or a lump sum from a bank account for which a tax deduction is not being claimed. Â Spouse contributions. |
Depending on your marginal tax bracket, the tax applied to the investment income may be lower inside superannuation. Â You may be eligible for a higher limit by bringing forward up to three years of non-concessional contributions if you meet the balance, age and contribution requirements. |
Don’t let the complexities put you off – we can help you determine how much you can contribute to your super each year and advise you on the best way to maximise your tax benefits and savings.
Please seek personal advice before acting on any of this general information above as this is not tailored to your individual circumstances or needs.
If you are interested in finding out more about how Unbound Financial can help you with Transitioning to Retirement, please contact us today. We’d love to hear from you!