RETIREMENT & SUPER

There are many reasons why planning now can put you in the driver’s seat later. For starters, have you thought about how long your retirement could last?

Take John and Mary, a couple aged 55: there’s a 72% chance Mary Will Live To Celebrate Her 80th Birthday And A 56% Chance John will celebrate it with her.

If they both make it to 80, she has a 7% chance and he has a 4% chance of living to 100. On average, once men and women reach age 65 they are likely to live a further 19 and 22 years respectively.

The bottom line is that, in order to make sure that your money doesn’t run out before you do, you may need to plan to be retired for at least 20 years – or be prepared to accept the fact that you may have to keep working for much longer than you anticipated. So you need to start thinking seriously about how you are going to provide for your retirement and consider seeking financial advice now, rather than later. Apart from anything else, planning for your retirement will mean that you can improve the chances of retiring when you want to, rather than having to stay at work.

Although you may retire whenever you choose, there are rules covering when you can access your super (for example, your preservation age), or convert it to an income stream (pension). So you need to bear this in mind when planning for your retirement.

Ownership protection insurance, coupled with a legal buy-out agreement, provides the continuing owners with the legal right of purchase at a predetermined price. It can also help fund the purchase of the exiting owner’s equity. The exiting party has peace of mind they, or their family, are going to get fair value for their business if they die, or are unable to work due to illness or disability.

The continuing parties benefit too. They can maintain control of the business without having to raise additional capital to take on more debt or be forced to hastily bring in new business partners.

Generally, you must reach your preservation age before you can access your super as a lump sum or an income stream.

If you are not quite ready to fully retire, but might be looking to reduce your working hours in the lead-up to retirement, a pre‑retirement pension might be right for you if you are age 55 or over. It allows you to convert your super into an income stream but doesn’t allow you to make a lump sum withdrawal until you’re fully retired or have reached age 65.

There are two separate tests used to determine the level of Government age pension payments you might receive– an income test and an assets test. Your entitlement is subject to both an income test and an assets test, and the test which results in the lowest rate of payment is used by the Government.

For more information on current thresholds visit www.centrelink.gov.au 

Of course, there are other financial considerations to think about.

• Will you still have a sizeable mortgage to pay off?
• What about your children’s education costs?
• What lifestyle do you desire in retirement?
• Have you saved enough to sustain your current lifestyle in retirement?
• Can you afford to retire or do you need to keep working?

That all depends on how much money you think you will need in retirement. This will be different for everyone.

To give you an idea of what is achievable, here are two examples which may help. Both examples assume that your retirement income has to keep pace with inflation of 2.5% pa, and that the investments deliver a return of 7% pa. A change to one or more of the variables will produce different results. These examples are for illustration only and do not take into account any of your personal circumstances.

You should speak to one of our licensed financial advisors to determine what is suitable for you.

¹ Social security amount effective from 20 March 2011 and includes the pension supplement.