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Optimising Your Retirement is Best Not Left to the Last Minute

A very powerful way to increase your retirement funds is a Transition to Retirement (TtR) strategy. A Transition to Retirement strategy can boost your funds for retirement without reducing your after tax income while at the same time minimizing the amount of tax you pay. A TtR  can also be great when you want to start cutting back on the hours you work while maintaining the same level of take home pay.

It works like this; By accessing a small portion of your super, your taxable employment income whether that be as an employee or self-employed, is exchanged for a tax effective income from your superannuation fund as a transition to retirement pension.

Simply put, by making extra contributions to your super through salary sacrifice, (or a personal tax deductible contributions if you’re self-employed) you reduce the amount of taxed paid from your marginal tax rate to the super contribution tax rate of 15%.

Effectively increasing your retirement funds without effecting the amount you receive in your hand at the end of the week.

This strategy is suitable for individuals who have reached their preservation age, (determined on your date of birth)  if you’re working as an employee or are self-employed, and have accumulated funds inside a superannuation fund.

For individuals born before 1 July 1960 your preservation age is 55, for those born after 1 July 1964 and onwards your preservation age is 60, and for those born in between 1 July 1960 and 1 July 1964 your preservation age is subject to your date of birth in between these dates.

If you have reached preservation age and are under age 60, the portion of your wage which is salary sacrificed is replaced by funds from transition to retirement pension (or super funds), tax free, or at a 15% tax off-set on any taxable portion. If you are 60 or above, the amount you receive from your transition to retirement pension is all tax free and all earning within the pension are tax free too, were if the funds were inside the superannuation environment those earning would attract 15% tax.

For a more in depth look into how a transition to retirement (TtR) strategy could work for you, contact Luke Howe on 08 8263 4009 or email your questions to luke@nieuvision.com.au