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How can I transition to retirement?

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Could you explain transition to retirement?

A 55-year old can draw on their super while they’re still working but they have to take the money as pension. A common strategy has been for someone to take the part-pension and to do salary sacrifice ‘on steroids’.

Here the worker/pensioner lives on the transition to retirement pension and salary sacrifices 100 per cent of their salary! You have to be careful of the limits and these have recently changed which would stop high-income workers sacrificing 100 per cent of their salary.

Generally, a combination of pension and part salary can keep the worker’s income close to the old level but they’re putting a lot more into super, possibly for 10 years, which can help build up a super nest egg. Remember, the tax on super is only 15 per cent and if you’re in a top tax bracket, this could be a smart strategy.

There are other tax benefits as the pension brings with it a 15 per cent tax rebate provided there have been no reasonable benefits limits problems.

The end-result of this transition to retirement plan can be less tax paid and a big boost to the amount of super you might end up with.

One warning – there can be some tricks and traps with super strategies and so a good adviser might be needed to help you put this in place.

For advice you can trust book a complimentary first appointment with Switzer Financial Services today.

Important information: This content has been prepared without taking account of the objectives, financial situation or needs of any particular individual. It does not constitute formal advice. For this reason, any individual should, before acting, consider the appropriateness of the information, having regard to the individual’s objectives, financial situation and needs and, if necessary, seek appropriate professional advice.

Published on: Tuesday, June 07, 2011

The Switzer Super Report is a newsletter and website for self managed super funds. With exclusive commentary from Peter Switzer, Roger Montgomery, Paul Rickard and Charlie Aitken the Switzer Super Report will help you maximise your after tax investment returns and grow your DIY Super. Click here for a free trial or subscribe today.

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