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Pre-retirement Solutions - Big Sky Financial Solutions

Pre-retirement Solutions



With kids grown up and retirement still 5- 10 years away this is the perfect time to plan and get a head start on retirement funding.

Some of the key questions to answer are:
- How much money you’ll need
- How to maximise your current retirement savings
- How the legislative changes give you a head start
- How to avoid the pitfalls and make a smooth transition to a secure retirement

Start the process in earnest 10 years ahead:
• Get rid of bad debt (non tax deductible debt)
• Picture your ideal retirement lifestyle
• Where will you live
• How will you occupy your time
• What expenses will you have
• Get the right advice
• Working out how much you’ll need
• Suitable retirement funding alternatives

Key steps to retirement wealth:
  • Intensify your savings & investments
  • Recycle your debt. Turn 'Bad’ debt into ‘good’ debt – interest on borrowings for investment is usually tax deductible. You may be able to borrow against home equity to fund an investment. Big Sky Financial Solutions Advisers can help you assess whether such a strategy is suitable for your circumstances.

  • Drive your super harder
  • Salary sacrifice
  • Co-contributions
  • Spouse contributions
  • Contribution splitting
  • Maximise super contributions
  • Take advantage of super rules
  • Consider a self-managed super fund


Have you considered a TRAP?

TRAP stands for ‘Transition to Retirement Allocated Pension’. A great opportunity for working people aged 55 - 65. TRAPs provide you with more control over your retirement.

These rules allow people who have reached preservation age (55 years) to convert their Super into an income stream even before they retire. At the same time it also allows you to use the tax benefits of investing through Super by maximising your voluntary salary sacrifice contributions. This strategy can significantly enhance your retirement income.

As a result, you can save tax (Super contributions are taxed at only 15%), build Super (maximising your salary sacrifice contributions) and withdraw a pension through Super (to supplement your earned income and/or to assist in providing cash flow so you can reduce your working hours).

You can be paid your super without retiring or leaving your job.
The move from full time work to being fully retired can be a challenging period for many Australians. New rules give people making the transition from work to retirement, more options. Since 1 July 2005, you have been able to take part of your Super as an income stream (i.e. a pension or annuity) once you reach your early retirement age – even if you are still working.

The new rules are part of the Government’s policy to encourage people to remain in the workforce rather than retire.

How does it work?
It’s quiet simple. If you are eligible, all you need to do is fill in your Superannuation Fund’s application form. Main aspects are:

- You need to have reached your preservation age (see table below). If you were born before 1 July 1960, this happens when you turn 55.
- No restrictions based on the amount of work you do or the income you earn.
- No requirement for you to work at all.
- No restrictions on the amount you can transfer from your super to a pension.
- You can leave some of your Super in your existing Super account and transfer the remainder to a pension.

When you were born
Preservation age
Before 1 July 1960
55
1 July 1960 - 30 June 1961
56
1 July 1961 - 30 June 1962
57
1 July 1962 - 30 June 1963
58
1 July 1963 - 30 June 1964
59
After 30 June 1964
60

Are there any catches?
Important details in the new rules include:
  • You can only be paid benefits in the form of a pension (be it allocated pension, term allocated pension or lifetime pension). You cannot be paid a cash lump sum while you are still working and have not reached age 65. (See “When can I get a lump sum?” below).
  • Even with access to your Super, you still need your Employer to agree to reducing your hours of work. (Otherwise you may be able to find another job part-time or as a casual).
  • Not all superannuation funds have the facility to pay pensions under the new rules.
  • You need to talk to your Financial Adviser about how these Superannuation benefits will affect your Tax status and eligibility for social security benefits.
And most importantly,
  • Budgeting! If you start spending your Super before retirement, you’ll need to use it for a longer period of time. You need to make sure it will last as long as you need it.

What happens if I change my mind?
Your needs or plans may change from time to time. For example, you may not want to receive pension payments if you return to work full-time.
If you are being paid a pension1, depending on the rules of that particular pension, at any time you can choose either:
- To continue to receive your pension payments, or
- To stop payments and return the balance of your pension to your Super fund.

Key points
  • Access to Super after early retirement age even if still working.
  • Limited to lifetime pensions, allocated pensions and term allocated pensions.
  • No lump sum payments until age 65 or retirement.

You may wish to seek professional advice before choosing to take your Superannuation while working, or to alter the amount you take in the future. Call Big Sky Financial Solutions on 1300 700 189 or email us for a free, no obligation initial appointment with a Financial Planner.

1 At present it is not generally possible to convert a lifetime pension or term allocated pension to cash. See Big Sky Financial Solutions for details.