Seeing as though you’re making super contributions most of your adult life, it’d be pretty disheartening to still be struggling financially when you reach the glory years of retirement. But with retirement (and savings!) often stretching out to 30 years these days, we need to be smarter than ever with our savings to make sure we’re covered for the future.
So if you’re counting down the years until you quit the workforce, here is a to-do list to make sure your financial affairs and super funds are all in order for a long, comfortable and stress-free retirement.
1. Use a super calculator
You first step is to work out how much money you will need to retire. Plug the numbers into one of the many online super calculators available, such as superguru.com.au or moneysmart.gov.au.
Tip: Imagine a few different scenarios to test your figures – things such as a sharemarket crash, your parents falling ill, living to 90 or cuts to the age pension.
2. Make a budget
As you get closer to stopping work, your ability to bolster your income disappears. Most people need to save hard in the last years and resist the temptation to spend up on lifestyle choices, such as holidays and renovations. This means making a budget and sticking to it.
^^^Actual footage of you after reading this article
3. Salary sacrifice
The most tax-effective way to save is through salary sacrificing. However, you are restricted by contribution caps and can only contribute up to $25,000 a year.
4. Speak to financial experts
Visit a financial planner and attend your super fund’s retirement seminars. There is much to discuss around matters like rolling over your super into the pension phase, investments and risk, plus your retirement plans.
One of popular question is around the government benefits that are available. You can go to the Department of Human Services website to work out the means and assets tests, age-based benefits and much more that you need to consider.
5. Ditch negative gearing
In the lead-up to your retirement, the time is right to sell your negatively geared property investments. There is a place for positively geared investment property in your retirement investment portfolio but not negatively geared property as it is a drain on your budget.
6. Update estate planning
Put all the safeguards in place to make sure you have all the right beneficiaries, such as up-to-date wills, binding death nominations for your super fund, power of attorney, enduring guardianship, and whether to set up a testamentary trust.
7. Set up an income stream
Instead of waiting until you retire, you can access your super benefits through a transition to retirement (TTR) pension once you reach your preservation age. This allows you to reduce your working hours and top up your part-time work income with a regular income stream from your superannuation.
8. Super splitting
Do you want to split your contribution with your spouse? You can contribute up to 85% of your super. However, you must still keep to the concessional contributions limits.
It works well if there is a difference in ages and account balances. For example, a younger spouse can split their concessional super contributions with an older spouse. This in turn makes a larger pool of funds available for the older spouse once that spouse is eligible to commence a pension and access their super benefits.
9. Cut your insurance
Weigh up whether you need the insurance that you took out many years ago. If you have paid off the mortgage and your kids are well on their way to being independent, you may not need the same cover, or any at all.
10. Recontribution strategy
Ever wondered what happens to your superannuation when you die? If the worst happens to you and your partner, your adult children may have to pay up to 17% tax on your superannuation. One way to get around this is to draw out your super and re-contribute it to your fund to maximise the tax-free component. This strategy is subject to the $500,000 lifetime limit.
11. Work part-time
Could you postpone your retirement to keep working and saving? Plenty of pre-retirees switch from full-time to part-time work. If you can live off your income from part-time work or your income and a small amount of super, this will help your savings to grow and last longer.
