Your 20-year holiday
Contents
Planning the longest holiday
of your life
We like to view retirement as the longest holiday of your life. It’s probably the most anticipated life-changing event ever. One that should be considered a choice when you don’t have to work. It’s not hanging up your identity, but finding more time to do what you want.
Who wouldn’t want to make that holiday, the most truly unforgettable experience?
Most will find the time to plan a four-week holiday. What if you put aside the right amount of time to plan a 20-year holiday? With considered and careful planning, retirement could surpass your wildest expectations.
If motivated with a clear goal in mind, it’s amazing how you can save money. Couple that with a clever strategy that lowers the taxes on those savings and uses the compounding benefits of time – imagine what you could do.
Don’t forget that you can access our Retirement Ready guide whenever you need.
Let's explore the possibilies
Here’s a scenario: you are 20 years away from retirement, and you commit to saving $50 per week. By channeling these spare funds to your superannuation in a tax-effective manner and investing in medium to higher-level share investments, you could potentially amass an additional $85,000 for your retirement. Now, consider saving an extra $100 per week – that could mean accumulating a total of $171,000 for your retirement fund.
Just imagine having that kind of money to splurge on your dream holiday.
Building on this, here’s some clever superannuation strategies you can begin incorporating into your plan.
Bring foward contributions
Bring forward contributions refers to a unique strategy where individuals can make additional non-concessional (after-tax) contributions to their superannuation over a 3-year period, effectively exceeding the annual contribution limits. This is particularly useful for those looking to maximise their retirement savings in a short time frame while remaining within the prescribed caps.
Australians under the age of 75 can access the bring forward rule, which allows them to contribute up to three times the annual non-concessional cap in a single year subject to certain eligibility criteria.
Carry forward contributions
Carry forward contributions enable individuals to make extra concessional (before-tax) contributions to their superannuation when they haven’t fully utilised their annual concessional contribution caps. This strategy allows individuals to catch up on contributions and boost their retirement savings.
Australians can carry forward unused concessional contribution caps from the previous five financial years, subject to balance limits. This can be especially beneficial for those with fluctuating income or those who wish to make catch-up contributions as they approach retirement.
For more details on superannuation and contributions click here for the ATO
Salary sacrifice
Salary sacrifice involves diverting a portion of your pre-tax income into your superannuation account. This reduces your taxable income and potentially lowers your overall tax liability, while simultaneously increasing your superannuation balance for retirement. It’s a popular strategy for employees looking to boost their retirement savings while benefiting from potential tax advantages, as salary sacrificed contributions are typically taxed at a lower rate than regular income.
Transition to retirement
Transition to retirement (TTR) is a strategy that allows individuals who have reached their preservation age but are still working to access a portion of their superannuation as an income stream while continuing to work. This can provide financial flexibility during the transition phase into retirement.
TTR strategies can assist with reducing working hours or managing work-life balance, as well as optimising superannuation benefits by drawing an income stream while preserving the tax advantages of super contributions.
Investing the
right way
Investing wisely within your superannuation is crucial for long-term growth. Diversifying investments across different asset classes, such as shares, property, and fixed income, can help manage risk and potentially achieve better returns over time.
Australians should consider their risk tolerance, investment horizon, and retirement goals when choosing superannuation investment options. Seeking advice from a financial advisor can help tailor an investment strategy to individual needs.
Consolidating superannuation accounts
Consolidating multiple superannuation accounts into one can simplify management and potentially reduce fees, ensuring that more of your money is working for your retirement. Australians often accumulate multiple super accounts over their working lives and consolidating them can help optimise retirement savings.
The Australian Taxation Office (ATO) provides online tools and services to assist individuals in locating and consolidating their super accounts efficiently. It’s important to consider insurance and investment implications before consolidation.
Spouse contributions
Spouse contributions are a way for one spouse to boost the superannuation savings of their partner. Eligible contributions may provide tax offsets and help build the super balance of a lower-earning or non-working spouse.
This strategy can be particularly valuable when there is a significant disparity in income between partners, helping to balance their retirement savings and enhance overall financial security in retirement.
Co-contributions
The government offers co-contributions to eligible individuals who make personal after-tax contributions to their superannuation. The government matches a portion of these contributions, effectively providing free money to boost retirement savings.
Co-contributions are designed to incentivise low and middle-income earners to save for retirement. Maximising co-contributions can be an effective way to increase superannuation savings without a significant financial burden.
Downsizer contributions
Downsizer contributions allow eligible Australians to make a one-time, after-tax contribution from the proceeds of selling their home (limits apply). This contribution does not count toward the usual superannuation contribution caps.
This strategy is designed to assist older Australians who are downsizing their homes as part of their retirement plans. It can provide a substantial boost to retirement savings while freeing up funds for a more suitable and manageable living arrangement.
Accelerating
your savings
What if you don’t have 20 years until retirement? There are other strategies available to potentially accelerate your savings towards that dream 20-year holiday. While some of these strategies may not be accessible to the younger generation, the government aims to support self-funded retirees.
Go to Services Australia for more helpful links to retirement
The journey
starts with you
When it comes to planning for the longest holiday of your life, you have the power to decide how much time, effort, and funds you want to dedicate to this adventure. It’s a journey that requires careful consideration, tailored advice, and proactive financial planning – with the payoff being incredibly worthwhile.
But you don’t have to do this alone. A trusted financial advisor can make all the difference to helping you maximise living your Good Life in retirement.
General Advice Disclaimer:
Information provided in the article is based on information of a general nature and may not be right for an individual. Any advice discussed in this article is General Advice and does not take into account any person’s particular investment objectives, financial situation and particular needs. While we believe the information presented is accurate and complete, Tribeca Financial does not accept responsibility for any inaccuracy or actions taken in response to this information.
Start planning your 20-year holiday today by booking in a ‘get to know you’ call with one of our Tribe.