4 key elements to your retirement planning

retirement planningRetiring from full-time employment is a major life change and is not to be underestimated. With some careful retirement planning and a good understanding of your options, you can ensure that your retirement is both comfortable and enjoyable.

During your retirement planning process, it is important to think about how much superannuation is enough, claiming the Age Pension, estate planning, and making contributions while receiving a pension from a super fund. One thing to keep in mind is that one income source may impact on another, so make sure that you are fully aware of all implications.

Let’s have a look at each of these points in a bit more detail.

1. How much superannuation is enough?

This is a big question and is one that we get asked regularly. Lifestyle is a very personal thing and as such, “enough” will depend entirely on the standard of living that you are accustomed to. One thing is for sure, you will want the same standard of living when you retire as you currently have. This makes retirement planning all the more important.

That being said, the one constant for all retirees is the ability to cover basic living costs (i.e. housing, energy, food, health, transport, leisure, etc.). Thanks to the ASFA Retirement Standard, budgeting for these costs has become a lot easier. The ASFA Retirement Standard provides a clear understanding of how much money is needed to fund either a comfortable or modest living standard. The information is updated quarterly to reflect inflation, giving users an honest and realistic overview of expenses.

According to the ASFA Standard, for the June 2013 quarter, a couple looking to achieve a comfortable retirment will need $56,406 per year and a couple looking to achieve a more modest retirement will need $32,656 per year.

2. Claiming the Age Pension

The Age Pension remains an important part of your retirement plan, regardless of any superannuation savings you may have. To qualify for the Age Pension, you need to satisfy certain age and residence requirements. These requirements will also determine how much money you are eligible to receive from the Government.

In terms of the age requirements, citizens who were born before 1 July 1947 will qualify for the Age Pension.

The Federal Government has flagged that the Age Pension age is set to increase from 65 to 65.5 years from 1 July 2017. Thereafter, the qualifying age will rise by six months every two years, reaching 67 by 1 July 2023.

3. Estate planning

Estate planning is so often overlooked and misunderstood, despite being a critical part of your retirement. In a nutshell, estate planning is the planning and arrangement of your assets and liabilities during your life. Estate planning is important to everyone, regardless of the amount of money you have, your age and your family status.

As a minimum, everyone should have a will and a power of attorney, both of which should be reviewed regularly or on major life events.

4. Contributions to a super fund while receiving a pension

It is a little known fact that you can actually continue to make contributions to your superannuation right up to the age of 74. The contributions can either be before tax contributions or after tax contributions.

If you are aged 65 or over, you will need to satisfy a work test before making contributions. The work test is designed to ensure that, at the time you are contributing to your super, you were gainfully employed during the financial year for at least 40 hours for no more than 30 consecutive days.

If you are 65 and over, are employed but do not satisfy the criteria of the work test, your employer can still make compulsory contributions on your behalf.

The information in this article does not constitute legal or financial advice. If you would like to discuss any of the above in greater detail, please contact your usual Axis adviser.