50’s and super – what’s important to know…..
I was recently went around the corner from my office to eat at an Italian restaurant. It was one of those restaurants where the entire menu is in Italian. Now my Italian is sketchy at the best of times, but what was a little more tricky was the menu items. Normally when you look at a menu you can quickly identify a couple fail safe options, this place however had me stumped. This restaurant was one of those places when I read the menu and went “Gosh! I can’t find anything!” Then when I looked more carefully some of the items listed start out sounding really nice… but then halfway through the description they added something funky!! So what’s this got to do with super and being in your 50’s? Stay with me….. When it comes to your 50’s and superannuation you start to get access to a whole heap of options for your consideration. However, like the Italian restaurant, sometimes they all sound interesting initially but once you get into the finer detail you need to make sure that you are not getting anything unexpected. So that you don’t end up feeling stumped like I did at the Italian restaurant, I thought I would give you a couple of tips on what you should be considering: 1. If you are in your 50’s and have some debt, you may be better of salary sacrificing the income into super than paying down the debt. The main reasons are:
By salary sacrificing the money into super you may be taxed less
At retirement you could draw a lump sum out and clear the debt out.
There are a heap of variables with this approach and it is important to crunch the numbers. You may find that this may save you heap of tax and allow you to clear the debt too. 2. If you have reached preservation age and can access your superannuation, one thing you might question is do you either draw an income stream, a lump sum, or do nothing at all? For some it makes a lot of sense to commence a transition to retirement strategy. This strategy is a way to reduce your overall tax position considerably. Your super fund also becomes 100% tax free too. However if you are a high income earner, you may decide to hold off and start this until you hit age 60 years old. If you are retired you may choose to take a lump sum rather than an income stream as this may save you tax too due to a different tax treatment of lump sums over income streams. Once you reached a condition of release which for some can be as early as age 55, there are a heap of options available to you with your superannuation. It is important to make sure you are maximising this as much as possible to reduce your tax, position yourself for retirement and maximise your capital. These points above are just a few of the things we consider when we look at your overall financial position to develop a Financial Plan. So unlike my restaurant experience, there is help available to make sure you aren’t getting anything unexpected in your financial future. Like all great ideas with Financial Planning however, it is important that you obtain professional advice before implementing any strategy – and we would of course recommend that you speak with our team at AJ Financial Planning.