Retirement Planning

You’ve decided to call it a day on your working life... congratulations! You’ve worked hard to put the right strategies in place to build your retirement assets, and now you need them to generate an income - maybe there is also the possibility of receiving Centrelink payments to help meet your living costs. One of the comments we hear a lot from our clients is; “I don’t know how I found the time to go to work!”.  You may be travelling or spending more time on your hobbies and it's highly likely that in the first five years or so of your retirement, you continue to spend similar amounts of money as you did while working. This is exactly why you’ll need to put your assets to work and have them provide you with the income you require. One of the better ways to do this is to turn your superannuation into an income stream via an account based pension. Take a look at the information below to see how this can be done.

A regular income stream from an allocated pension or annuity can be an effective way to fund your retirement. Some retirees may also be eligible for social security benefits from the Australian Government. It’s important to understand how all of these options work, to determine which is right for you.

Will I have enough to retire?

With shorter working lives and improved life expectancy, Australians can look forward to a much longer retirement than past generations. A male retiring at age 60 will likely spend around 23 years in retirement, and for a female, they can look forward to around 26 years1. Enjoying a long and happy retirement, however, may cost more than you think. According to the Association of Superannuation Funds of Australia (ASFA), an individual seeking a comfortable lifestyle needs an annual after‑tax income of $41,1692. You would need a lump sum of $663,6623 at retirement, to provide this level of income for 25 years.

Rowland Financial Advisory can help you make sense of this by projecting your final savings at retirement, determining your future income potential, and taking you through your options.

Transition to retirement – flexibility and choice

Before you retire you have the option to ‘transition to retirement’ (TTR). This means you can reduce your work hours and supplement your income with tax‑effective withdrawals from your super through a pre‑retirement pension. Alternatively, you can continue your current level of work, make withdrawals from your super and increase your tax‑effective super contributions. Your financial adviser can help outline your choices, and the difference this may make financially, once you retire.

A pre‑retirement pension forms part of a TTR strategy and is subject to a maximum annual drawdown of 10%. If you are fully retired, there is no maximum drawdown limit and payments will continue until your account balance is exhausted or you withdraw it in full. You also have a wide choice of investments including low risk term deposits and cash products, and you can generally switch options at any time should your needs and circumstances change.

How do I access an income in retirement?

The most common ways to access a retirement income stream are:

  • Allocated or account based pensions: using only superannuation savings
  • Annuities: using either super savings or ordinary (non‑super) money.

Without adequate super or other investments, you may need to rely in part or whole on the government Age Pension for a retirement income. For more information contact Rowland Financial Advisory.

Age requirements

Your eligibility for the Age Pension depends on your current age and when you were born. If you were born before 1 July 1947, you have reached the qualifying age for Age Pension. From 1 July 2017, the qualifying age for Age Pension will increase from 65 years to 65.5 years. The qualifying age will then rise by six months every two years, reaching 67 by 1 July 2023.

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Refer to the table below to determine at what age you will be eligible for the Age Pension.

Born Women eligible for Age Pension at age Men eligible for Age Pension at age
Between 1 July 1947 and 31 December 1948 64.5 65
Between 1 January 1949 and 30 June 1952 65 65
Between 1 July 1952 and 31 December 1953 65.5 65.5
Between 1 January 1954 and 30 June 1955 66 66
Between 1 July 1955 and 31 December 1956 66.5 66.5
After 1 January 1957 67 67

The amount of Age Pension you receive will depend on the income and assets test. The Age Pension is treated as taxable income and pension rates are indexed in March and September each year according to the Consumer Price Index (CPI)4

Why financial advice is important

More than at any other time in your life, talking to a financial adviser before you retire will help put you on the road to financial security and access the following benefits:

  • Getting help from an adviser can help you decipher complex super and tax legislation and translate them into actionable strategies
  • They follow a proven process to ensure all aspects of your financial well‑being are covered
  • They can help you assess the best income stream option and also structure your retirement portfolio to minimise tax
  • They are supported by a network of technical and qualified specialists in super and retirement
  • You can schedule regular reviews to ensure you stay on track before and after you retire so all you need to focus on is enjoying a new more relaxed lifestyle.

1.  The Consumer Price Index or CPI is an indicator of changes over time in the general level of prices of consumer goods and services. It measures the cost of purchasing a fixed basket of goods and services representative of households’ expenditure during a specified period.

2.  Annuities are 100% assets test exempt if commenced prior to 20 September 2004; 50% assets test exempt if commenced between 20 September 2004 and 20 September 2007; and 100% assets tested if commenced from 20 September 2007.

3.  After 1 January 2015, the Government has proposed that all new account based pensions will be deemed for income test purposes, like share dividends or interest, when assessing eligibility for the Age Pension.

4. Australian Bureau of Statistics, Life tables, Australia, 2005–2007