September 21, 2018

How to Make Sure You have Enough Retirement Money to Take Overseas Trips

After many years of working full-time, most, if not all, Australians look forward to retirement. It’s the time when people relax, go on a vacation, and spend time with loved ones. This is a time to do whatever it is that you want to do but have no time or even resources to do so while you’re still working.

Of course, your salary will stop coming in once you retire, so it’s really important to save money and plan for retirement to ensure a comfortable life. But how can you make sure that you have enough retirement money for things that you want to do such as overseas trips? Here are several things to consider when planning for retirement:

Know how much superannuation you’ll need

This serves as the main source of income for retirees. In retirement planning, consider your future lifestyle needs. For instance, taking a vacation overseas costs money. You also need to consider future costs such as medical expenses. Make sure to have a clear vision of what you want to do so you’ll know how much superannuation you would need to maintain your lifestyle.

Use a superannuation calculator

This can give you an estimate of how much super is enough to keep the lifestyle that you want.

Update your superannuation fund

If you think that your current funds may not be able to meet your desired target, you may want to update your superannuation by increasing your regular contributions and/or finding competitive rates. The higher the interest rate, the more money you’ll have when you retire.

Consider investment options

Superannuation is not the only financial source for when you retire. You can ensure that you have enough retirement money for overseas trips by having other investment products to increase your savings.

Create a budget

When you have a budget, you’ll know how much money you’ll need and allocate funds to what you want to do. Budgeting can give you peace of mind, not worrying about whether there’s enough money to enjoy retirement.

Retirement planning should be done as early as possible so you’ll have more time to increase your superannuation and savings in general. You may also want to seek superannuation advice from professionals to better guide you on what to do to ensure that you’ll have enough money for overseas vacations and other activities that you want to do upon retirement.

Do you know other tips when it comes to superannuation in Australia? Share your insights in the comments section.

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Superannuation: 5 Things to Consider

It’s very easy to just let your employer put contributions into your super fund, check the annual report from your super fund each year and leave it at that until you retire.  However, keeping an active eye on your superannuation, learning some superannuation basics in Australia and using some hidden superannuation tips can boost your super savings and give you a better standard of living in retirement.

Here are 5 ways you can boost your super and transform your financial future:

  1. Check how much you are paying in fees

Every superannuation fund manager charges you fees for running that fund. If your fund is charging more than one per cent of your account balance in fees you should reassess your fund against other competing funds to see if you would be personally better off moving your money. Fees may seem minor, but over 30 years they can have a huge effect on your eventual retirement benefit.

  1. Consider changing your investment options

Don’t just leave your money in a default investment option with your super fund. Look into the various options available within your fund. This is where you may need some financial planning advice. Depending on your risk appetite, will depend on your investment option for your superannuation fund. For example if you are conservative with your money and will get stressed out by volatile movements in your balance, then perhaps a more conservative investment option is for you. It’s worth exploring this with a good financial adviser.

  1. Consider changing your fund

If you are not happy with your fund or its performance you are able to change funds. This can be time-consuming but can be worthwhile. Look for a fund that shows strong past performance, charges reasonable fees and offers cost-effective life insurance and you could end up in a much stronger position than you would if you remained with your current fund.

  1. Make additional contributions

You can make additional contributions to your super fund up to a capped annual limit. Doing this can really boost your retirement savings.

There are two ways you can make these contributions: concessional (before tax) contributions and non-concessional (after tax) contributions.

Speak with your employer’s accounts department, your super fund or your accountant about how you can benefit from making extra contributions.

  1. Find your lost super

If you’ve held jobs in a variety of industries or have largely worked part-time, you may have money sitting in various superannuation funds. To find out if you have super you don’t know about to track it down for free. Once you have sourced any missing super contributions, roll them all over into your preferred super fund.

Final Thoughts on Superannuation

If you take the time and trouble to keep an eye on the progress of your super savings and follow the above hidden superannuation tips, you could be many thousands of dollars better off once you reach retirement age. Learning the superannuation basics in Australia is well worth while to boost your super savings and secure your financial future.

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What You Should Know about Superannuation Changes in 2017

On November 23, 2016, legislation to implement superannuation reforms passed the Parliament. This legislation aims to improve the superannuation system and make it more sustainable with better targeted tax concessions. It likewise increases the flexibility of the system in staying aligned with the changing work-life patterns of people in Australia. These reforms will take effect on July 1, 2017.

Here are several things that you should know about superannuation changes in Australia for 2017:

Legislating the objective of superannuation

This reform aims to provide income in retirement as a substitute or supplement to the Age Pension. Every bill or regulation related to superannuation should have a statement of compatibility to ensure that all proposed superannuation reforms are aligned with the objective of the system.

Introducing the transfer balance cap

A transfer balance cap worth $1.6 million will be introduced on the total amount of superannuation accumulated by an individual and can be transferred into the tax-free retirement phase, though future earnings on balances on this phase will not be capped. These can be in an accumulation account or outside the superannuation system and are taxed at 15%.

For those who are retired and whose balances are lower than $1.7 million by June 30, a transitional arrangement will apply. This means that starting July 1, they have half a year to make their balances under $1.6 million. Also, the transfer balance cap will be indexed and will grow. By 2020-21, it can reach up to $1.7 million.

Reforming the taxation of concessional superannuation contributions

From $300,000, the additional contributions tax (Division 293) will be lowered to $250,000. Also, the government will lower the annual cap on concessional superannuation contributions from $30,000 to $25,000. This is applicable for people who are below 49 years old at the end of the previous financial year.

Lowering the annual non-concessional contributions cap

The annual non-concessional contributions cap to $100,000 will be reduced. A new constraint will then be introduced, wherein those with a balance of $1.6 million and above will no longer be eligible to make non-concessional contributions. For those who are below 65 years old, they will be eligible to bring forward up to three years’ worth of non-concessional contributions.

If the balance of an individual at the start of the contribution year is $1.6 million and above, he/she will no longer be able to make non-concessional contributions. For those whose balances which are close to $1.6 million, they can access the years of bring forward so their balance becomes $1.6 million.

Transitional arrangements will be applicable for those who have not fully used their bring forward before July 1. If this is the case, the amount of the remaining bring forward will be up for a re-assessment on July 1 to determine the new annual cap. For individuals who are 65-74 years old, they are eligible for making annual non-concessional contributions of $100,000 if they work for 40 hours in a 30-day period for every income year, also called the work test. They will not be able to access the three years of bring forward of contributions.

Introducing the Low Income Superannuation Tax Offset (LISTO)

The Low Income Superannuation Contribution (LISC) will be replaced with Low Income Superannuation Tax Offset (LISTO). With this reform, individuals with taxable income reaching $37,000 will be refunded for the tax paid on concessional contributions of up to $500. This ensures that low-income earners do not pay more tax on superannuation contributions than their net pay.

Improving access to concessional contributions

All individuals who are below 65 years old as well as those who are 65 to 74 years old who meet the work test will be allowed to get a tax deduction for personal contributions to eligible superannuation funds up to the annual cap of concessional contributions.

 Allowing catch-up concessional contributions

Individuals who have a total superannuation balance of below $500,000 before the start of the financial year will be allowed to carry forward unused concessional cap space for up to five years. This will soon be helpful for individuals who took time out of work or whose income differs greatly from one year to the next.

Extending the spouse tax offset

The Government will extend the spouse tax offset to individuals whose recipient spouses have incomes reaching $40,000. This can help ensure that more couples will be able to support each other in saving for retirement. This superannuation reform will mostly be beneficial for women who have lower incomes and have lower balances in superannuation contributions.

Removing barriers to innovation in retirement income stream products

To encourage providers to have more retirement offerings, the Government will extend the tax exemption to deferred income stream products. This reform will help retirees in managing consumption and risk in retirement such as the longevity risk wherein retirees outlive their savings.

Improving the integrity of transition to retirement income streams

In this superannuation reform, the Government will eliminate the tax exempt status of income from assets which support TRIS. Instead, these will be taxed at 15%. This aims to ensure that the TRIS will not be used as a tax minimisation strategy. Under this reform, certain superannuation income stream payments will no longer be used as a lump sum for tax purposes. Income streams will be tax-free, or will be taxed at the marginal tax rate of below 15% offset of the individual.

Abolishing the anti–detriment rule

The anti-detriment rule that allows superannuation funds to claim a tax deduction for anti-detriment payments given to eligible dependents will be removed as it is obsolete and not aligned with other aspects of the tax law. The anti-detriment payment is an amount that is included in the lump sum death benefit which is paid to an eligible dependent. With this reform, there will be consistent treatment of death benefits in all superannuation funds. The lump sum death benefits given to eligible dependents will still be tax-free.

Streamlining administrative processes

The Government will implement measures to minimise the compliance challenges on taxpayers and superannuation providers. This reform will also make the system more efficient as it aims for fairness in procedures in dealing with the Commissioner. These are the measures to streamline administrative processes:

  • A single notice for all tax liabilities in a financial year will be issued to taxpayers by the Commissioner of Taxation. Having only one notice will make it easier for taxpayers to seek advice on all of their tax liabilities.
  • The compulsory obligation for superannuation providers will be removed. With this measure, individuals with defined benefit superannuation interests will no longer have to provide an individual end benefit notice to the Commissioner.
  • Align objection rights which are applicable to discretionary decisions by the Commissioner about non-concessional contributions with those which are applicable to discretionary decisions on concessional contributions. This measure corrects any inconsistency in the law, ensuring that individuals have the same objection rights when disagreeing with a discretionary decision by the Commissioner on non-concessional contributions.

Starting July 1, 2018, the current release authority arrangements will be replaced with standardised timeframes and processes. A default process will be introduced for those who want to undertake it or those who do not make an election when it comes to all release amounts from superannuation.

These are some of the things that you should know about superannuation  Australia for 2017. You may want to do more research to have a better understanding of these reforms and be guided accordingly.

Got any comments on the superannuation changes in Australia? You can share your ideas in the section below.

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Superannuation in Australia

Many people don’t see retirement as something to prepare for when they’re still young, and that there is still a lot of time to think about it. But in reality, if you want to have a comfortable retirement, it is advisable to spend some time in learning about superannuation funds as early as possible.

What is superannuation fund? Also called super fund, it is essentially money set aside for your retirement. If you’re an employee, your employer contributes to your super fund, plus your own contributions. According to the law, your employer should pay 9.5% of your salary into your superannuation fund. These contributions accumulate and grow over time, ensuring that you can live comfortably once you retire.

Insurance through your Super Fund

Most super funds include life insurance to members. It usually differs in coverage: death cover, total and permanent disability cover, and income protection. Why is it important to find out more about insurance included in your superannuation fund? Here are some points to take into account:

  • The default super fund of your employer should have minimum life insurance or default cover that you can increase, decrease or even cancel. The insurance premiums will be deducted from your super account.
  • Getting a life insurance through your super fund is usually cheaper. It also offers flexibility since you can choose the amount that you plan to be covered for, and you can get the cover needed by yourself or your family.
  • With the default cover, there is no need to undergo a medical check-up to get it, and you don’t need to pay higher premiums when you have a pre-existing condition.

Retirement Calculator

Another thing worth-considering as far as superannuation in Australia is concerned is knowing how much your super fund is when you retire. You can do this with a superannuation calculator in Australia. It can give you an idea if you’re on track in saving for retirement and how much money you need for the lifestyle that you want to have once you retire.

There are different types of superannuation calculators in Australia but in general, keep in mind that it can only give you an estimate or an idea of how much your super fund is worth upon retirement and how fees will affect the final amount. It cannot indicate the actual final superannuation benefit since there are other things to be considered. These include investment earnings, your age, inflation, financial needs, and other external factors.

Know other tips when it comes to retirement calculator and superannuation in Australia? You can share your ideas in the comments section below.

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