Timing your retirement

Have you fixed a date in your head for when you want to retire or are you still dreaming about “one day” in the distant future? It can pay (literally!) to try and time your retirement to make the most of your finances and any benefits from the Age Pension. Here are some things to think about.

Tax and super

When you access your super can have a big impact on how much money you have for retirement. For example, if you start using your super before age 60, you’ll pay tax on withdrawals, but if you start using it after age 60 there’s no tax.
And what about any leave or entitlements you have at work? Depending on when you plan to retire, it could make sense to take your leave days first and contribute more to super to grow your balance.

Or you might take your leave as a lump sum payment, or even wait until the new financial year and split up your tax liabilities.

Getting this decision right could potentially save you thousands in tax.

Making extra contributions to super

Over your working life, you have the option to add extra to your super account yourself, on top of the contributions your employer makes for you.

But remember, these types of extra contributions can’t be made forever, so if you want to boost your super before retiring, keep the following in mind.

• There are limits on how much you can contribute to super ($27,500 before tax [including employer contributions] or $110,000 after tax per financial year*). By planning ahead, you can make the most of these caps over time instead of just the last few years before retirement.
• If you’re aged 67 to 74 and you want to make personal contributions that you claim a tax deduction for, you’ll need to satisfy the work test.
• Once you reach age 75, you’re generally unable to make any extra super contributions yourself. The only exception is the downsizer rule, where you can contribute proceeds from the sale of your home.
• You can only make extra contributions into a super account, not a pension income account. So, if you start a First Super Retirement Income account and then decide you want to contribute more super (and you’re still eligible to do so), you’ll need to start a new super account AND a new Retirement Income account. This can be done (we’ll help you), but it’s a hassle that’s better avoided if possible.

*There is some wriggle room with the contribution caps if you use the carry-forward and bring-forward rules. We suggest seeking advice on this topic. In fact, it can be helpful to speak to a qualified Financial Planner^ to form a contributions strategy for your retirement.

Age Pension eligibility

If you’re planning to use the Age Pension along with your superannuation when you retire, here are some things to consider.

• Are you eligible? Along with age criteria, there are other Age Pension rules around residency and your income and assets.
• If you retire before you’re old enough to receive the Age Pension, will you have enough super or other income to support yourself in the meantime?
• Are you retiring with a younger partner who isn’t pension age yet? The way Centrelink works out your payments could be affected by this, but our Financial Planning Team^ can recommend strategies for this situation.

Take a 30-minute Retirement Health Check

One of the easiest ways to start working out when you should retire is to check if your super is on track.

Our Retirement Health Check service can help you with this. Chat by video or phone with one of our Financial Planners^, who will help you consider:

• Your current balance and projected future balance
• When you plan to retire
• Your future income needs
• How the Age Pension could help you.

There is no extra cost for this service.

Book a retirement health check

^First Super Financial Planners are authorised representatives of Industry Fund Services Limited (ABN 54 007 016 915, AFSL 232514).

Issued by First Super Pty Ltd (ABN 42 053 498 472, AFSL 223988), as Trustee of First Super (ABN 56 286 625 181). This article contains general advice which has been prepared without taking into account your objectives, financial situation or needs. You should consider whether the advice is appropriate for you or read the Product Disclosure Statement (PDS) before making any investment decisions. To obtain a copy of the PDS or Target Market Determination, please contact First Super on 1300 360 988 or visit our website at firstsuper.com.au/pds.