This is the final instalment of our ‘decades’ approach to accumulating superannuation funding to supplement or sustain your retirement lifestyle. Quite commonly, this is the decade to commence retirement and so there is less time available for action. We explore some aspects of super in both accumulation, and in pension, phase.
Superannuation accumulation
Super in your 60s may be enhanced in ways not so readily available in earlier years. At the very least, it is a time when personal expenses are less likely to absorb as much of your disposable income.
Tax concessional contributing
Some key sources of funds for contributing to super, include –
- Salary sacrifice of wages/ salary
- Personal deductible contributions (up to the relevant contribution cap) – and/ or
- Unused cap carry forward concessional contribution.
Each of the above has the added benefit of being tax concessional. That means that what you contribute will reduce the income on which your tax for the year is paid. Each suggested source requires either specific action on your part or professional advice. (We have published articles on some of these topics on our website as follows: salary sacrifice, and personal super contributions.)
Strategic transitioning
A strategic plan toward funding one or more of the contribution types is to implement a transition to retirement income stream TTR, or TRIS). This TTR can be taken under specific eligibility criteria and will potentially be tax free. The pension drawn this way will be from funds set aside from your superannuation accumulation account. You can continue to contribute to the accumulation account whilst drawing the pension.
The receipt of this tax effective income stream reduces family budget pressure and can facilitate recontribution to the accumulation account. The cashflow net effect favours this process – and it can provide tax concession for your non-dependant superannuation death benefit beneficiaries.
Non-concessional contributing
The advantages of taking a tax deduction when contributing to super are apparent, but don’t overlook non-concessional contributions. There are caps – and tips – applicable to these contributions. The earnings from investing them within a superannuation account are taxed in the same way as are concessional contributions. Investing earnings on funds outside of superannuation are taxed at your marginal rate, inside superannuation the applicable rate is 15%.
A work-test applies if you are over-67. The cap on this type of contribution is $110,000 – but a useful tip to utilise, is the three-year bring forward. This provision means that in one year you may be able to contribute $330,000. (These contribution rate caps are current for the 2023/24 financial year)
Downsizer contribution
Another tip for those eligible, is to use the downsizer contribution. This is an amount of $300,000 able to be contributed to superannuation for each partner as a couple. The contribution must be made within a set timeframe following the sale of the family home. Further good news is that the downsizer contribution is additional to other non-concessional contributions.
Strategic investment
Whilst there is an expectation that older members of super funds are more conservative about investing, that is not a rule. The advantage of being conservative is that the risk of loss of investment value is diminished, so also is the opportunity for growth. Careful evaluation of your financial circumstances and your tolerance for risk are evaluated in an investor risk profiling assessment. If it suits your circumstances and risk aversion profile, a prolonged period of more assertive investment strategy MAY help your funds grow.
Accumulation goal/ target
The Association of Superannuation Funds of Australia (ASFA) has calculated as at December 2023, a comfortable lifestyle in retirement requires –
- For a couple, $72,150 – and
- For a single, $51,280 (both figures rounded to next $10).
On the ASFA Page linked above, you can read the definition of what constitutes a ‘comfortable lifestyle’. In short, it has some frills, but not many. They also describe a ‘modest lifestyle’ – with fewer frills. And they provide calculation of the appropriate amount to have accumulated by the time of retirement (at age 67) for each of these lifestyles. Those figures are as follows:
- Comfortable: Couples require $690,000; Singles require $595,000
- Modest (relying on Age Pension support): the figure is $100,000 for both Couples, or Singles.
Where to from here?
Super in your 60s is a time to sieze every opportunity available to fund the lifestyle you seek in retirement. We have provided guidelines above as to targets but the definitions of ‘comfortable’ or ‘modest’ may not be your constraint. The qualified, experienced financial advisers at Continuum Financial Planners Pty Ltd have many clients at all stages of the superannuation process. Call us to discuss your circumstances and to arrange a meeting with one of our team – phone 07-34213456, or Book A Meeting.
(This article was first posted in My 2024. It may occasionally be refreshed/ updated.)
