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Clarity from uncertainty: The facts about retirement

With all the recent headlines about costs of living, political uncertainty and a pandemic that is far from over, it’s not surprising that many Australians are feeling uncertain about what the future holds. But uncertainty eases with clarity, which is why we’re pleased to provide these facts about retirement.

Here we overview what you should know, and the steps you need to take as you navigate your way to your retirement of choice.

If you’re in your 50s or beyond, planning for retirement should be on your radar, even if it still feels a long way off. So, let’s look at the current facts about retirement, and what the bigger picture is likely to mean for your financial future.

The super guarantee is rising
From 1 July 2022, the Employer Super Guarantee will increase to 10.5%, the second of staged annual increases which eventually become 12% by 2025/26. This means your employer is now contributing more to super on your behalf.

Retirees can now keep more in super
The Federal Budget announced an extension to the reduced minimum drawdown rate. This provides retirees with the option to leave more money in their super account, where it has opportunity to grow. The minimum annual payment required for account-based, allocated and market-linked pensions and annuities was reduced by 50% for the 2019–20 financial year and will remain until 2022-23.

The pension age is rising
The current eligibility age is 66 years and 6 months (for anyone born between 1 July 1955 and 31 December 1956). If your birthdate is on or after 1 January 1957, you’ll have to wait until you turn 67, which becomes the Age Pension age from 1 July 2023.

Australians are working for longer
A survey conducted in 2021 by the Council on the Ageing (COTA) found that 49% of those aged 65 had retired, compared with 60% in 2018. Of those still working, around 25% said they didn’t think they’d ever retire.¹

There’s more incentive to downsize
From 1 July 2022, the age at which you become eligible to make a ‘downsizer contribution’ to your super will reduce from age 65 to 60. This means from age 60, you can contribute up to $300,000 (or $600,000 for a couple) within 90 days of settlement from the proceeds of selling your home straight to your super without impacting contributions caps.

With many Aussies concerned about having less than the recommended retirement savings (currently estimated at $545,000 for a single person and $640,000 for a couple²), the recent changes are geared toward ensuring you have more opportunity to grow your super funds.

What it means for you…

Whether you’re hoping to retire as early as possible or work until you can’t, making the most of the time you have to plan for retirement will help you to chart a course to a comfortable future. Even if retirement still feels a long way off, implementing sound planning early is the key.

Next steps…

Catch-up your concessional contributions: Recent legislation has made it possible to top up your super balance by with the un-used portion of the concessional (before tax) contributions cap (currently $27,500) from prior years.

Make use of non-concessional contributions: Non-concessional (after tax) contributions of up to $110,000 per year can also be added to super to make the most of any extra cash, while the 3-year bring-forward rule enables $330,000 in extra cash to be added, such as proceeds from the sale of an asset or an inheritance.

For both strategies, there are conditions relating to age and the total balance of your super fund that need to be considered.

Review your personal insurances: If you have personal insurances, it’s important to review your policies, as the strategy you implemented several years ago may no longer suit your current or pending stage of life.

Of course, any next steps should be considered in context of your overall financial plan.

We also understand that the past two years have been challenging, for many reasons. If a family member, friend or colleague, could benefit from the type of financial advice and support you’ve experienced for us here at Blue Harbour Financial Partners, please extend an invitation on our behalf.  We’re here to help.

Please contact Blue Harbour Financial Partners on 07 3821 1161 or email office@blueharbour.com.au.

At Blue Harbour, we are known for helping everyday Australians to PLAN and GROW their personal prosperity, PROTECT what’s important, and RETIRE to the lifestyle of their choice.

Blue Harbour Financial Partners and its advisers are Authorised Representatives of Fortnum Advice Pty Ltd ABN 52 634 060 709 AFSL 519190. This article is general advice only and does not take into account your objectives, financial situation or needs. Please consider your own circumstances and whether the advice is right for you before making a decision. Always obtain a Product Disclosure Statement (PDS) before making any financial decisions in relation to acquiring a product.

[1] State of the (Older) Nation 2021 COTA
[2] ASFA, December quarter 2021

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