Call us on 1300 794 893

Your Money

Making the super transition from work into retirement

I have heard about a transition to retirement program that means you can retire and still work part-time, and it can help bump up your super. How does it work?

Let’s get out the calculator.

Imagine you were on $70,000 a year and had, say, $400,000 in super. The tax paid would be $17,400 and the net pay would be $52,600. The strategy would involve rolling the super into an allocated pension and drawing a pension of $37,000, and salary sacrificing $45,000.

After allowing for tax where the $45,000 is only taxed at 15 per cent – that’s the appeal of salary sacrifice – you can end up with approximately $52,000. That’s part-salary and part-pension. Calculations suggest this trick will push up the super by an extra $6000 compared to not salary sacrificing.

After the age of 60, when the pension is tax-free, this strategy can add approximately $12,000 to the nest egg balance.

The figures look a little confusing, but the benefit is that you’re getting more money into your super at only 15 per cent, and the pension income is taxed at 15 per cent until age 60 but this rate is less than the normal tax rate on wages.

You may need to seek advice with this but it has been a great strategy for many would-be retirees needing to turbo-charge their super.

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, August 10, 2010

blog comments powered by Disqus
Pixel_admin_thumb_300x300 Pixel_admin_thumb_300x300 Pixel_admin_thumb_300x300