Boost retirement savings

What a great deal! If you are 55 or over, here’s how you can lower your tax bill, boost your savings and perhaps even take advantage of other government products, all of which will assist in a more comfortable life in retirement.

“Transition to retirement” (TTR) strategies offer workers aged 55 and over the opportunity to further boost their retirement savings. The main points of the strategy are as follows:

Once you are age 55, you can start a pension with your superannuation. The pension income will be taxed at the concessional rate between the ages 55 and 59. From age 60, this pension is tax free.
You can salary sacrifice up to $25,000pa and the superannuation fund will pay tax at 15% rather than at your marginal tax rate
Income streams drawn under this strategy must be between 4% and 10% of the total TTR account balance at the commencement of the first income payment in a 12-month period.

The key is to structure a strategy through salary sacrifice so that your taxable income is around the level at which you pay the marginal rate of 15%, which is the same rate your super is taxed. You then replace the sacrificed income with income from the superannuation pension. You will need to check if your employer can accommodate salary sacrifice arrangements.

Despite changes to tax rates and superannuation contributions caps arising from the 2012 Federal Budget, TTR strategies can still be extremely tax effective for people who have a reasonable amount in superannuation.

The strategy can be used to:

Boost your superannuation as you near retirement through the tax savings available;
Reduce your hours of work but maintain your available income;
Create a new lifestyle as you make the transition from full-time work to part-time work, and later to retirement.

As there are many tax implications with the movement of money in and out of your superannuation fund, and mistakes could be costly. Please talk to us for info and guidance.