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What are the main advantages of becoming a pensioner?

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I am 55 years of age and have been told that I should take on a transition to retirement pension. What are the main advantages of the decision to make myself into a pensioner?

There are a number of advantages, but I think the greatest one is that your nest egg super amount is currently in the accumulation phase as you have not opted for a transition to retirement pension. When you do, (and as you are 55 and you are able to do so), your money now in super will go into pension mode, which means there will be zero tax on the earnings of that sum. For simplicity, let’s assume you have $500,000 in super and you earn 10% over the year. This equals $50,000, but because you’re in accumulation mode, you will be taxed 15% on those earnings, which would be $7500. So clearly, the more you have in super, the greater the attraction for the transition to retirement pension, however saving 15% on any amount is better than not having it in your own pocket and it going to the tax office. Also you can draw out 4-10% of your balance when you are on a transition to retirement pension while you keep on working. Some people take some super money to help them do salary sacrifice to the maximum cap, which is $25,000 for Aussies under 60 years old and $35,000 for 60 and over. Some people take their 10% out and re-contribute it so the money goes from being taxable to untaxable if ever the money is left to family members after death. As you can see, there are some good reasons to think about becoming a premature pensioner!

Published on: Monday, July 29, 2013

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