“I'm in my early 50s and starting to think seriously about retirement. I want to make sure I have enough to live comfortably. What strategies can I use to maximise my retirement income?"
-Question from Sophia in Coffs Harbour, New South Wales
Top answer provided by:
Robert Daniele
Hi Sophia,
First things first, it is never too late to start preparing and in your 50’s is a good time to start for what is ahead. The reason why I find being in your 50’s is a good age because the opportunity cost of “locking your money away in superannuation” becomes less and less the older you get. This means you get the same tax benefits of contributing to superannuation but don’t have to wait as long to access them as you approach your 60’s where the normal conditions of release of superannuation start.
Working out your retirement number
In your question you mention you would like to maximise your retirement income. Simply a retirement income is only needed to meet retirement expenses! So, working out what your expenses may be in retirement is quite important. I have on my blog here. some information on what the Association of Superannuation Funds of Australia (ASFA) publish as what is a general comfortable vs modest retirement living expenditure amount. However, everyone is different in what they actually need.
A good starting point to working this out is completing a budget. I like to tell my clients to do a budget now (i.e. whilst your still working). Then also one for what you might like to spend in retirement. A good website to complete this budget is on the government’s MoneySmart site. The reason I get clients to complete two budgets is everyone is different and some people might want to spend more in retirement (i.e. more eating out or travel) and others actually might spend less in retirement (i.e. less expenses travelling to work or going from two cars in the household to only one car).
Where to from there
Once you know how much you need or want as an annual retirement expense figure. You can then work backwards from there by looking at your asset position and how in the future you will use your assets to generate an income. Now these assets could be the obvious ones like building up your superannuation or having investment properties. They could also be the not so obvious ones like the home you live in. Some people in retirement might downsize their home to a cheaper one and utilise the excess equity to then re-invest in superannuation to boost their asset position to ultimately boost the income they are able to draw.
Currently if you are 55 or older you can contribute up to $300,000 from the proceeds of the sale of your home into superannuation, that figure is $300,000 each if you are a couple (please see the ATO website for the full list of conditions).
Reviewing contributions to superannuation now is also a key way to help build your superannuation up for retirement. Currently the rules are you can contribute up to $27,500 per year concessionally to superannuation (this includes monies you put in like salary sacrifice and monies your employer puts in like Superannuation Guarantee – SG). This financial year 2023/2024 is also the last financial year to utilise catch-up provisions from the 2018/2019 financial years. For example, the ATO will let you, provided your super balance is less than $500,000 as at 30 June of the previous year – catch-up concessional contributions in years up to 5 previous years prior that you hadn’t maximised your concessional cap in those years. So, we are now over 5 years into this rule so your unused amounts in 2018/2019 will no longer be available after this year.
Hopefully there is a few ways I have mentioned above to help with your thoughts on options to maximise your retirement income to ultimately have a comfortable retirement, as always - this information is general in nature and doesn’t take into account your specific personal circumstances and also doesn’t highlight all the specifics of the available contribution rules which is why it is important to seek professional advice before acting on any of the information.
While the Adviser Ratings Website facilitates the question and answer functionality, all such communications are between users and authorised financial advisers, of which Adviser Ratings has no affiliation. Adviser Ratings is not the advice provider and does not provide financial product advice and only provides information that is general in nature.
Article by:
Comments1
"What they really want to know is how much their investment will generate. We talk about strategy when all they really want to know is how much you will make me. If everybody could have a defined benefit scheme, that's what they would all want. If the market falls over, the complaints will start! Unfortunately for the clients, they are yet to learn there is no silver bullet. Thats what they really need to learn. "
Robert napoletano 15:25 on 10 Apr 24