Hi Michael, with our children becoming more independent, we have started to shift focus to our retirement. What should we consider leading into retirement? Andrew and Emma, Warriewood.

Thank you for your question, Andrew and Emma. While we often focus on securing a bright future for our children, we sometimes forget to plan for our own. Retirement, which may once have seemed distant, can quickly come into view.

A great starting point is discussing what retirement means for you. This could involve travelling around Australia in a caravan, rediscovering old hobbies, embarking on overseas trips, or spending time with grandchildren, among other possibilities. These retirement aspirations will vary, resulting in different income requirements.

Once you’ve defined your retirement objectives, it’s time to create a plan. The key is to make your money work for you by using your current cash flow to grow your assets, which will ultimately generate your desired income. When allocating surplus cash to build assets, it’s crucial to invest tax efficiently. Superannuation offers an excellent environment for this purpose. There are two main ways to contribute to your superannuation:

  1. Concessional contributions: These are contributions taxed at a concessional rate of 15 per cent, usually lower than your marginal tax rate. The annual cap is $27,500, which includes any employer contributions.
  2. Non-concessional contributions, often referred to as ‘after-tax’ contributions, involve using money that has already been taxed at your individual marginal tax rate. The annual cap is $110,000, and your total superannuation balance must be under $1.9 million. These contributions are not tax-deductible and don’t reduce your taxable income.

The significant advantage with superannuation is the tax rate applicable on the investment earnings is up to 15 per cent compared to investing personally which earnings can be subject to a tax rate of up 45 per cent plus Medicare levy.

It’s important to be aware of the rules and limits associated with each of these contribution types. These rules may change over time, so it’s a good idea to stay informed about the latest regulations. Additionally, any contribution made to superannuation will be locked away until you meet a condition of release.

Remember that retirement planning is an ongoing process, and it’s never too early to start. The more proactive you are in your preparations, the better you can ensure a comfortable and fulfilling retirement, living the life you want. Consulting with a financial advisor and considering your unique goals and circumstances will help tailor your retirement plan to your specific needs.

Any questions, please speak with your financial adviser, or call me to discuss on 8376 0350.

Regards, Michael

Financial planner Michael de Bomford of Up Wealth Management is an Authorised Representative of Consultum Financial Advisers Pty Ltd, AFSL 230323. Phone 8376 0350 or visit upwealthmanagement.com.au

This is general information only, as in preparing it we did not take into account your personal objectives, financial situation or needs. Before acting on this information, you should consider whether it is appropriate for your personal circumstances. Although the information is considered reliable, we do not guarantee that it is accurate or complete and you should not rely upon it. Please seek financial advice specific to your situation before making any financial, investment or insurance decision.