Re-mapping the road to retirement

July 2009

Before making a decision about which path to take, it’s worth reviewing some of the options available. What strategies could be adopted to help steer you through the difficult times ahead?

Strategies for pre-retirees to consider

Salary sacrifice

This strategy involves contributing a certain amount of regular salary, bonuses or any other allowances received from an employer, into super, before-tax. This is an effective strategy to build retirement savings in the years prior to retirement. A salary sacrifice arrangement may also deliver tax incentives, such as lowering taxable income. Please note, salary sacrificing requires the consent of an employer.

The transitional concessional contributions cap for those over 50 (which applies until 30 June 2012) is $50,000.

Transition to retirement income stream (TTR)

• Pre-retirees ease into retirement, by reducing their work hours, whilst enjoying the same level of income.
• A TTR strategy may also deliver tax savings. This strategy allows salary sacrificing some income into super, resulting in tax rate of 15 per cent rather than a marginal tax rate on the amounts that have been sacrificed. This income is replaced by drawing money from a TTR income stream, which is taxed concessionally or is tax-free after age 60. In addition to this, all earnings on investments backing a TTR income stream are also tax-free!
  

As well as leveraging the strategies available inside the super environment, strategies are also available outside of super.

Strategies to consider outside super

Delaying retirement

In the current economic climate, there is an increasing trend to remain in the workforce for longer than initially planned. With the advent of strategies such as Transition to retirement, entering into retirement has become more fluid with many members choosing to continue working on a part-time basis rather than ceasing work altogether. This approach provides the opportunity to continue earning an income and reducing the need to draw down on retirement savings. Additionally, it keeps retirement savings intact and provides the opportunity to recover any loss in capital in the event of a market recovery.

Centrelink eligibility

With the value of many investment portfolios decreasing, some retirees may now be eligible to receive
at least a part pension. This can help improve a retiree’s position as they will not need to rely solely on
their own capital and their income can be supplemented by Government payments. To find out
whether you may be eligible for a part pension, go to http://www.centrelink.gov.au.

Seeking expert advice

The GFC is now being heralded the worst global financial shock since the Great Depression. To be dealing with financial conditions of such magnitude only reinforces the importance of seeking advice from an expert. Tapping into the extensive knowledge and experience of a financial adviser can provide you with insight and guidance on a number of strategies that may assist in managing the difficult times ahead.

Momentum Financial Advice¹ is a service made available by your Fund, which is designed to take the hard work out of making financial decisions through the assistance of a financial adviser.

Call 1300 55 7586 and speak to a Plum Member Services Consultant about obtaining financial advice either over the phone or face to face – the initial consultation is available at no cost to you.

While it is inevitable that the global economy will eventually recover, when this will occur is unknown. In the interim, it is worthwhile considering the range of potential strategies available in order to help protect retirement savings. When ever a fork in the road is reached, it’s important to evaluate the possible paths to take. The best route to follow depends on your financial and working situation, as well as your goals and tolerance to risk.

Any questions?

¹ * The Momentum Financial Advice service is delivered by GWM Adviser Services Limited (GWMAS) ABN 96 002 071 749 AFSL 230692. GWMAS is part of the National Australia Group of companies. Telephone-based financial advisers are licensed through GWMAS. Financial advisers on the Momentum Financial Advice panel are licensed through GWMAS or other licensees. The financial advisers and their associated licensees may receive a commission when applications are lodged for certain financial products. Further information on commissions can be obtained from the financial adviser's Financial Services Guide. Neither Plum nor the Trustee endorses or guarantees any advice provided by GWMAS or any financial adviser referred through the Momentum Financial Advice services. The Trustee, through its administrator, Plum, merely facilitates members’ access to these services and does not accept any liability for the services provided.