You may have retirement on your mind. Have you thought about a transition to retirement strategy? Have you considered the tax ramifications of retirement? Who does a transition to retirement strategy work best for?
This plan is normally works well for those:
- Employed full-time
- Over 55 years of age
- Have superannuation
A better understanding of transition into retirement
You can use the “transition to retirement” clause in your superannuation to draw from it while continuing to work part-time. This allows you to maintain the level of income that you are accustomed to.
The most important things to consider with a transition to retirement strategy:
- donating a part of your salary into superannuation
- using your pension to replace the income you put into superannuation
How it can be tax effective?
The benefit is that your superannuation is taxed at a friendlier rate that your salary. By replacing your salary with a pension you will be able to have the same cash flow while drawing a smaller amount from super. As a result your superannuation savings should continue to grow.
An effective overall strategy
Using your superannuation savings can be a perfect way to transition into retirement. The amount that your savings grow will be determined by the contributions you continue to apply into super by using salary sacrifice.
On the other hand if you take more money out than you replace it with, its value will be reduced. As a result you will not have the same level of funds disposable when you finally retire.