Joel Callen
Retirement Income

How to make the financial transition to retirement easier

Setting up a transition to retirement can be very rewarding. If done the right way it may also improve your financial outlook.

It can provide benefits, such as:

The idea that you can draw an income from your super, while still salary sacrificing more pre-tax income within the contributions cap (up to $35,000) is very appealing. If a substantial part of your income is taxed a marginal income tax rate of more than 15 per cent this can reduce the overall tax you pay – and all while boosting your retirement savings.

However, if you are thinking about a transition to retirement pension (TRP), you should always seek professional financial advice.

A TRP is one of the two accounts you will need to begin, at minimum. The other account is an accumulation account. This usually means keeping open the super account so you can continue to pay contributions.

Since there’s a delicate relationship between the TRP, salary sacrifice and your personal tax arrangements, it’s a wise idea to have an outsider expert review before you head down this road.

They will also be able to help you identify whether salary sacrificing will affect other benefits, and if it will help you achieve tax savings according to your personal financial situation.

You should also check that your employer allows you to salary sacrifice, and be prepared to commit to how much you want to contribute. The earlier you start with salary sacrifice, the greater the potential benefits in the long run. But professional advice will help you decide whether it’s a good idea for you in conjunction with a TRP or if there’s a more effective solution for your needs.

Related links:

Six retirement books everyone should read

A guide to reviewing your super

What should I do with my superannuation?

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finance, retirement income, retirement, money, superannuation, Nicole Reddy