As we all celebrate another birthday this year, it is a great time to reflect on our individual strategy for retirement. Regardless of your age, the first step to achieving a plan is creating one!
Retirement planning is no longer about selling your business and slowing down. Retirement does not mean that you have to stop work. Effective retirement planning needs to start long before you want to do this.
It is important to ensure that your retirement plan integrates with all aspects of your life including your overall plans, structure and current and future income needs.
The first step in an effective retirement planning strategy is to determine your current position.
- Where does your income come from?
- What assets do you own and how much do you owe on them?
The next step is to look out (say 10 years) to picture your lifestyle.
- What income will you need to support this lifestyle?
- How much superannuation will you need to retire on to generate this income?
- What assets will you hold?
- What debt will be secured against these assets?
We can then determine what opportunities are available to you under the current rules to achieve this 10 year picture. For example, depending on your current age, some strategies can be put into place now to maximise superannuation contributions and help you achieve your goals and minimise taxation.
Pensions can be started whilst you still work from age 55 onwards, subject to some conditions. There are a number of different types of pensions which have different requirements and taxation implications. Therefore an important part of your retirement planning is reviewing your options and determining the best one for you. Pensions from age 60 are tax free to you and ensure your superannuation fund pays no tax on its income and earnings. Pensions from age 65 are tax free to you and your superannuation fund and are not capped as to how much you can withdraw. These pensions can often assist you to fund more tax deductible contributions into superannuation which helps you save tax.
If retirement age is still a long way off for you, it can still be beneficial to understand how you are planning for your eventual retirement. Is your business your retirement plan? How will you be able to sell your business and minimise the tax payable on the sale? Will you be able to contribute the sale proceeds to superannuation so that the earnings are tax free into the future?
There are significant opportunities when developing your retirement plan depending on your overall strategy to work towards contributing more to superannuation each year to maximise your tax deductions and therefore minimise your tax liability.
At elliotts, we are able to provide you with strategic advice, specific superannuation advice and financial planning advice. We can help you to articulate your retirement plan and determine what opportunities exist for you to maximise your income and assets and minimise tax. Please call us today to speak about your retirement plan. Retirement planning is just another way for us to help you to become financially well organised.