Strategies and options for retiring

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Pensions |  Superannuation |  Transition to retirement |  Super tax

Retirement can be a great time of life, especially if you've planned ahead. You may have paid off the house, brought the kids up well and helped them move out (not that this will stop them moving back in), built the sundeck and got that four-burner barbecue, and you've got the time, and cash, to travel anywhere.

Not everyone aspires to a 'cappuccino' lifestyle, but a comfortable life in retirement should not be asking too much. And no matter what the expectations are for retirement living, how to fund it and how much will be needed are questions that never get a cut-and-dried answer.

We are also living longer, and the amount of time spent in retirement is creeping up to be nearer to the time spent working and paying taxes. Treasury's Intergenerational Report indicates that between then and 2050 the number of people aged 65 to 84 years old is expected to more than double. Those aged 85 and over will more than quadruple. 'The number of traditional working age people to support each retiree is expected to fall from five people today, to 2.7 people in 2049-50. In 1970, there were 7.5 working age people for each person aged over 65 years,' the report states.

The options available to boost retirement and superannuation savings include such arrangements as salary sacrificing to super, getting access to the government co-contributions, taking advantage of the tax concessions also available for paying more money into super (if you're in business for yourself), and you may be eligible for some government benefits.

Pensions
If you've reached pension age and your income or assets don't go over a pre-determined level, you could be eligible for an age or service pension. Pension age is 65 for men and 63.5 for women (and five years earlier for service pensions), although they'll both be set at 65 by 2014. There is an income cut-off limit for pensions, and a reducing scale up to that cut-off, but you should check as they change (here's the Centrelink page with that information).

You may have been eligible for a 'pension bonus' if you delayed applying for a government pension and kept working beyond pension age (see pension bonus details here) but this scheme was abolished for new entrants in September 2009. A 'work bonus' could be available, which means that only half of your first $500 of your gross income made from working (not from investing) in a fortnight will count towards an age pension income test. Changes from July 1, 2011 mean the bonus amounts will also be spread over a year, not limited to being calculated every fortnight (see details here).

Superannuation
Getting to that stage in life where you can access your superannuation savings is a noteworthy event, deserving not only a flying champagne cork but serious consideration of your options to work out what's best for you.

You can get to your super when you meet what is known as a 'condition of release'.  There are many different conditions of release and the common ones include reaching age 65, reaching 'preservation age', and retirement (after reaching preservation age). Preservation age depends on when you were born, and ranges from 55 if born before July 1, 1960 to 60 if born on or after July 1, 1964 (and it is not the same as pension age, mentioned above).

There is generally no limit to the amount of money you can keep in your super fund, even after you retire. However, with certain types of account-based pension funds, you must withdraw a minimum amount each year – a pre-determined percentage (which depends on your age) of the opening balance at July 1. And you can keep that money there for as long as you want, with earnings on those funds (such as interest income) generally taxed at 15% (which the fund pays).