How to plan my retirement income
Planning for retirement can seem to be tricky and complicated, but with the right advice it does not have to be.
Having said that good planning process includes:
1. Your retirement income planning:
Where does your income come from?
2. Your tax planning:
How to minimise your tax during your retirement as well as tax payable by your beneficiaries (often your children).
3. Your estate planning:
How to pass on your assets to your beneficiaries with simplicity, cost and tax effectively.
4. Your government support planning:
Could you be eligible for any government support? Can you maximise this benefit? This applies to Age Pension, Disability Support Pension or even Job Seeker.
5. Your cashflow planning:
How much do you need to live on and will you have sufficient income for life?
6. Your emergency assets planning:
Access to funds in case of emergency or additional lumpsum spendings is essential and often overlooked, you need to plan for it.
7. Your investment planning:
What investments to choose to support all other planning parts, how to structure your investments portfolio to deal with the constantly changing markets?
8. Your products planning:
Obviously, you need to plan which products will deliver on all the above listed points.
That is a lot of information that you will need to gather and many financial strategies you will need to compare to finally arrive to your optimum financial position to carry on with your retirement. When after all this work you can honestly say that you achieved financial security of income for your retirement life, together with longevity of your savings, you can say that you have done a good job.
But if you are unsure how the retirement planning process work, or you find this overwhelming, this is the time to find the best retirement advice. And we are here to help you.
So today, I would like to discuss, how I go about starting this retirement process and concentrate on the first point Your retirement income planning: where this refitment income of yours can come from, what sources of retirement income you have available and how to structure them for your financial benefit.
Here is a chart that lists your possible retirement income sources:
1. Superannuation account-based pension
When you approach your retirement you have an option to rollover your superannuation savings into a pension account, that will provide you with regular income payments in retirement. You have a full flexibility, you can choose how your savings are invested, how often you receive your income and how much is paid to you as a pension. Super fund has an obligation to pay you the minimum amount as prescribed by the government, but you can increase this payment if you wish, or you can make lump sum withdrawals when you need extra fund.
Your minimum pension payment is calculated by your super fund based on the balance of your pension on 1st July each financial year and paid to you based on your age.
Here is the table of minimum payments that your pension has to meet each year:
2. Government Age Pension
When you reach Age Pension age, you could be eligible for government support in the form of the Age Pension. And you should, if there are strategies to assist you with accessing Age Pension, you will not only have an additional income stream, which in most cases once established continues for life, but you will automatically be eligible for the Pensioner Concession Card, with many discounts and retirement benefits, not available to others. Age Pension can provide a big chunk of your retirement income but often is not enough for a comfortable retirement. Here is a comparison, as per ASFA figures:
3. Personal investments and interest from savings
This income could include for example:
- Bank accounts interest
- Rental income from property
- Dividends from shares
When preparing for retirement, we often check if this is the best place to keep those investments, and if those investments improve your retirement in the first place. Are they worth keeping or better to sell and concentrate on other forms of income.
4. Lifetime income stream
Lifetime income, such as lifetime annuity provides different benefits to income stream such as account-based pension, so they complement each other greatly.
Unlike account-based pension, annuity provides income for life and if you chose for life of your spouse as well. This income can protect from longevity risk, where other investments cannot. Investment is not market linked; therefore, your income is not reliant on market performance.
5. Employment
Some people decide to continue working in retirement, sometimes due to the financial need, but in many cases to stay active and involved with the community. This is 100% your choice, but it is a good practice to check how your work income impacts your Age Pension eligibility.
Receiving income from different income sources has a number of benefits:
- Increases income certainty and longevity
- Often can increase the overall income received each year
- Reduces financial risks taken to produce income and grow value of your retirement savings
- If done correctly, can increase your Government Age Pension benefit
- Increases income and capital flexibility and accessibility
- Protects better against inflation
If you find planning for your retirement a bit overwhelming or you don’t know where to start but want to ensure your retirement has been financially maximised, check our website AboutRetirement.com.au and organise a meeting with me. On each page of our website there is a button BOOK A MEETING, then choose the day and time for us to meet and discuss your options and your possible strategies.
I would love to assist you with preparation for your retirement with well-structured income and assets for your security and longevity of savings.
By: Katherine Isbrandt CFP®
Money Strategist & Retirement Planner
Principal of About Retirement
