For most Australians, the approach of retirement is something to look forward to. Yet it can also be a time that fills us with trepidation, after all, we’ve saved for it, worked towards it, but are we really prepared for it?

While Superannuation is a way of saving for life after work, it’s not the only factor you need to consider when planning your retirement.

How much do you know about retirement planning?

Take our quiz and find out!

Q1: How much savings do you need to retire?

  1. About $250,000 for each person in your household.
  2. It depends on what you plan to do in retirement.
  3. Enough to pay off your mortgage.

Q2: What age can you retire?

  1. 55 years
  2. It depends on your date of birth
  3. 65

Q3: Which of the following statements is true in relation to low interest rates?

  1. Low interest rates result from a high demand for finance.
  2. Low interest rates aim to encourage saving.
  3. Low interest rates aim to encourage spending.

Q4: Is it possible to outlive your retirement money?

  1. Retirement investments are designed to last a lifetime.
  2. We’re all living longer and we need to plan ahead.
  3. It doesn’t matter – that’s what the pension is for.

Q5: Which of the following is a benefit of transitioning to retirement?

  1. You could pay less tax.
  2. You’re no longer required to contribute to super.
  3. It reduces reliance on retirement savings.

Q6: Which is NOT a concession specifically designed for retirees?

  1. SAPTO (Seniors and pensioners tax offset)
  2. Family tax benefit
  3. 0% tax rate for account-based pension.

Q7: Which of the following is NOT a benefit of the Seniors Australian Health Care Card?

  1. Discount on property rates
  2. Free or discounted healthcare expenses
  3. Discounted lottery entries

Q8: What assets can you have in addition to my home to be eligible for the age pension?

  1. Only the family home is exempt from the assets test.
  2. Investment properties, providing you’re not operating as a property developer.
  3. Various types including investments, personal effects and shares.

Answers & call to action

Q1: How much savings do I need to retire?

  1. About $250,000 for each person in your household.

  2. It depends on what you plan to do in retirement.

  3. Enough to pay off your mortgage.

The amount you’ll need in retirement is largely determined by your personal circumstances. For example, you may have expenses to consider like:

  • a mortgage,
  • rent,
  • medical costs, etc.

The amount you’ll need will also consider what you will be doing with your new freedom. Perhaps you plan to travel, renovate your home or take up a hobby.

The government’s Money Smart website has a basic calculator, designed to give you a ‘ballpark’ estimate of the savings you might need. Go to www.moneysmart.gov.au and search “calculators”. For an accurate guide to your future requirements, you’ll need to look in more detail at your current position, your retirement goals and expectations, and develop a strategy to get you there. This is where professional advice is invaluable.

Q2: What age can you retire?

  1. 55 years

  2. Depends on your date of birth

  3. 65

Retirement age in Australia depends on when you were born. The government applies a formula based on the year and month of your birth, but you can work it out using Money smart’s Super and pension age calculator found on their website.

Go to www.moneysmart.gov.au and search “calculators”.

Q3: Which of the following statements is true in relation to low interest rates?

  1. Low interest rates result from a high demand for finance.
  2. Low interest rates aim to encourage saving.
  3. Low interest rates aim to encourage spending.

Government monetary controllers, in Australia it’s the Reserve Bank, reduce interest rates when they want to encourage consumer spending. The theory is that businesses and individuals with debt, will not need to spend as much servicing their loans and will have more cash in their pockets, which, it is hoped, would find its way into retail and other industries.

Low interest rates tend to happen when an economy experiences an increase in savings and a reduction in borrowing – which can signal a lack of consumer confidence. While governments like us to save, they also hope that lower interest rates will lead to increased borrowing confidence, particularly business borrowing, resulting in greater productivity and economic growth.

Speak to your financial planner to learn about ways to maximise your retirement income in times of low interest rates.

Q4: Is it possible to outlive your retirement money?

  1. Retirement investments are designed to last a lifetime.

  2. We’re all living longer and we need to plan ahead.

  3. It doesn’t matter – that’s what the Age Pension is for.

We’re living longer these days. According to the Australian Institute of Health and Welfare, the average Australian can expect to be in retirement for around 20 years. Even if you own your own home and have no debt, you will still have to cover living expenses, medical, food, insurances, utilities and so on… for twenty years.

Twenty years! Think about it.

Without adequate planning and an appropriate savings strategy, you may not be able to afford those lifestyle goals you’ve been looking forward to – holidays, home renovations, etc., let alone access to emergency cash if the fridge breaks down or your roof springs a leak.

A financial planner will discuss your retirement plans with you, and work with you to create a retirement savings plan that will enable you to retire without financial worries. Don’t you deserve it after all those years of work?

Q5: Which of the following is a benefit of transitioning to retirement?

  1. You could pay less tax.

  2. You’re no longer required to contribute to super.
  3. It reduces reliance on retirement savings.

A transition to retirement (TTR) strategy works by enabling you to boost your retirement savings and pay less tax through salary sacrifice.

You start by rolling your super savings into a retirement income stream. Then you salary sacrifice your wages to boost your super savings. The portion of your salary that you salary sacrifice will be taxed at 15% instead of your normal income tax rate – which for most people is a tax saving.

By salary sacrificing, you’ll receive less money in your take home pay, but you can make up the difference by taking a small income stream from your retirement funds.

A TTR is a complex strategy with conditions attached. If you’re not careful, it may result in you having less money to retire on, but done right, it can be a terrific way to boost retirement savings and ease into freedom from work.

As with all financial strategies, be sure to seek qualified advice before making any decisions.

Q6: Which of the following is NOT a tax concession specifically designed for retirees?

  1. SAPTO (Seniors and pensioners tax offset.

  2. Family tax benefit

  3. 0% tax rate for account-based pensions.

Family tax benefit is the correct answer here because it is not a tax concession specifically designed for retirees – it’s designed to support families with the cost of raising children.

The Seniors and pensioners tax offset (SAPTO), and the 0% tax rate for account-based pensions are tax concessions for retirees.

SAPTO is a tax concession that enables eligible retirees to reduce the amount of tax they are liable to pay – in some cases it’s possible to reduce your tax payable to zero. To claim the SAPTO you need to meet certain eligibility criteria. The Australian Tax Office (ATO) website has further information, including a calculator to work out whether you qualify. For details, go to www.ato.gov.au and search SAPTO.

The 0% tax rate for account-based pensions can be particularly beneficial to retirees taking their retirement savings as an income stream rather than a lump sum. This is because the earnings on investments in an account-based pension are tax free, which can be a considerable saving.

Everyone’s situation is different and SAPTO and account-based pensions may not be the most appropriate strategies for you. Additionally there are a number of conditions you’ll need to meet in order to take full advantage of the tax concessions.

A qualified financial planner will be able to advise you as to whether you meet the criteria, and assist you in setting up the most suitable strategy for you.

Q7: Which of the following is NOT a benefit of the Seniors Australian Health Care Card?

  1. Discount on property rates
  2. Free or discounted healthcare expenses

  3. Discounted lotto entries

While the Seniors Australian Health Care Card will not enable you to enter lotteries at a discounted cost, it does provide seniors with discounts and freebies across a broad range of products and services.

Some of the most commonly used benefits of the Seniors Card are:

  • discounts on utilities bills
  • free or discounted rates and health expenses like ambulance trips and dental check-ups
  • discounted activities like movie or theatre tickets
  • some retailers, such as hairdressers or beauticians provide discounted services
  • some cafes and restaurants offer discounted meals

Go to www.servicesaustralia.gov.au for eligibility criteria and further information.

Q8: What assets can you have in addition to your home to be eligible for the age pension?

  1. Only the family home is exempt from the assets test.
  2. Investment properties, providing you’re not operating as a property developer

  3. Various types including investments, personal effects and shares

You can own assets and still qualify for the age pension, and the list of the types of assets is considerable. It includes:

  • financial: bank accounts, shares, securities, loaned money, gold or silver etc.
  • personal belongings: furniture, jewellery, computers, life insurance policies, vehicles, etc.
  • managed investments: funeral bonds, property, unit trusts, life insurance, etc.
  • businesses: shares in partnerships, trusts, private companies, etc.

The value of these assets is calculated on the amount you’d be able to sell them for, and this amount is taken into account when determining your pension eligibility.

The government’s Money Smart website offers a calculator for you to check your pension entitlement against your current income and assets. Go to www.moneysmart.gov.au and search for “calculators”.

So, how did you go?

Retirement planning is one of the most daunting issues facing each of us. Get it right and you can enjoy the next phase of your life living your dream.

But getting it wrong may be costly and leave you unable to afford the lifestyle you’ve worked so hard for.

Contrary to common belief, you’re never too young to begin retirement planning. In fact, the earlier you set up your strategy the more options will be available to you. However it’s important to remember that superannuation is not a set-and-forget investment. Make sure you regularly review your strategy with your planner, ensuring you stay on track.

Similarly, you’re never too old to adjust, amend and tweak your retirement plan. Particularly as retirement approaches, small changes, top-ups and retirement-specific strategies can significantly impact your savings. Review regularly!

For more information or to speak to one of our Financial Advisers please contact TNR Wealth Management on 02 6626 3000.

Disclaimer
Past performance is not a reliable indicator of future performance. The information and any advice in this publication does not take into account your personal objectives, financial situation or needs and so you should consider its appropriateness having regard to these factors before acting on it. This article may contain material provided directly by third parties and is given in good faith and has been derived from sources believed to be reliable but has not been independently verified. It is important that your personal circumstances are taken into account before making any financial decision and we recommend you seek detailed and specific advice from a suitably qualified adviser before acting on any information or advice in this publication. Any taxation position described in this publication is general and should only be used as a guide. It does not constitute tax advice and is based on current laws and our interpretation. You should consult a registered tax agent for specific tax advice on your circumstances.