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Retirement Solutions - Big Sky Financial Solutions

Retirement Solutions



How much is enough?




Annual Income required at retirement

$30,000
$40,000
$50,000
$60,000
Lump sum required at retirement

$492,914
$657,219
$821,523
$985,828

Assumptions: Total value at retirement is in future dollars. Assumed earning rate of %7 is net of fees and taxes. Risk profile is Prudent/Balanced (60% exposure to growth assets/40% exposure to defensive assets). CPI Rate 0f 3%.

Retirement Income Streams

Income streams, which you can use to fund your retirement, can be broadly categorised into:

• Traditional income streams (Superannuation based)
• Non-superannuation investments:
- Interest on deposits
- Dividends from shares
- Rental income from property

This is a brief description of the main types of income streams generated by Superannuation. Your Big Sky Financial Solutions Financial Planner can help you decide which is the best option for your needs.

Choosing the right income stream - Not ‘one-size fits all’

Considerations:

• Amount needed
• Level of flexibility
• Investment choices – risk vs return
• Tax
• Centrelink – Assets and Income Tests
• Estate planning

An indexed pension from your Employer's Superannuation Fund

These are typically from the public service or larger Employers and:

• It is payable throughout your lifetime
• You do not have access to the capital
• Upon death of the pensioner only some of the benefit reverts to the beneficiary
• The residual benefit, after death of the pensioner and beneficiary, may not be passed on to the estate of the deceased
• Payments are linked to the Consumer Price Index (CPI)

Guaranteed Annuity

This is purchased, usually at the time you retire.

• Via life company
• Private funds and/or Superannuation
• Lifetime and/or term certain
• No access to capital
• Preferred Centrelink treatment
• Asset test exempt
- 100% if purchased prior 20/09/04
- 50% if purchased b/n 20/09/04 – 20/09/07

Simple Pensions (Allocated Pension)

This is purchased, usually at the time you retire:

• Through a Fund manager or SMSF
• Superannuation funds only
• Income concessionally treated under Centrelink Income Test
• Flexible
- Payments can be varied (subject to government-set minimums)
- Withdraw lump sums
- Better estate planning options
• Tax effective
- Investment earnings tax-free
- 55 - 60: Tax free component and Tax rebate
- Age 60 and over: Tax free
• No guarantee your pension payments will last your lifetime
• No income-splitting
• Not exempt from the Centrelink Assets Test

Term Allocated Pension (TAPs)
• No longer available
- Existing TAPs can be transferred to a new provider
• If established before 20 September 2007 Centrelink ignores 50% of account balance for Assets Test

Transition to Retirement

The Transition to Retirement option commenced on 1 July 2005.

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.

Call your Big Sky Financial Solutions Financial Planner on 1300 700 189 or email to help assess whether such a strategy is suitable for your circumstances.