How we add value to clients Transitioning to Retirement

We recently met with a client named Paul, who had just turned 60.  Paul still worked full time, earning $80,000 per annum and had $400,000 in superannuation savings.

Paul wanted to retire at age 65 and we decided to set up a Transition to Retirement Strategy to maximise Paul’s superannuation benefits prior to retiring.  We used Paul’s existing superannuation benefits to start a superannuation pension account paying Paul a tax free income of $16,375 per annum.  Paul was then able to start salary sacrificing $25,000 of his wages into superannuation and best of all he was left with exactly the same after tax position with these added benefits:

  • His income tax reduced from $19,147 per annum to $10,522 per annum. Factoring in the 15% contributions tax payable on adding his $25,000 into super each year being $3,750 per annum, Paul was still saving a total of $4,875 per annum in tax.
  • As Paul was adding in $21,250 into super each year ($25,000 less 15% tax = $3,750) and only drawing a Pension of $16,375 he was able to save an additional $4,875 into his superannuation account each year to boost his savings for retirement.
  • All earnings with a Pension account are taxed at 0% versus 15% in superannuation. Based on an average 7% investment return, Paul would save approximately $4,200 per annum, tax on fund earnings.

By putting this strategy in place we were able to save Paul considerable tax and in addition boost his savings for retirement.

Transition to Retirement strategies can benefit clients from age 55 plus.  The overall benefit will depend on an individual’s level of income and superannuation balance.

If you think a Transition to Retirement strategy may be of benefit to you or someone you know, feel free to book in for a complementary 30 minute meeting to discuss how this strategy may be of benefit to you.

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