To make matters worse, people keep throwing all these technical terms at you – such as ‘Reasonable Benefit Limits’ (RBL) and ‘Eligible Termination Payments’ (ETP's).
Retirement should be one of the most enjoyable stages of your life – a time to reward yourself for many years of hard work. It should be a time you can look forward to enjoying… not a time of uncertainty and confusion. Whether you are approaching retirement or have already retired, your financial planner can guide you towards the most effective solutions for your particular needs. Proper planning can help you to go through retirement with the confidence that you are financially secure.
Retiring from the workforce does not have to mean an end to receiving an income. Through careful investment into certain financial products such as immediate annuities, annuities or allocated pensions, your investments can pay you a regular income.
Numerous fund managers provide these kinds of products. Whilst they share many similarities, there are also several variations. Your financial planner can explain and recommend the right choice to suit your individual circumstances, time frames and objectives within the scope of products/platforms available to our planners to recommend.
Retirement planning is the process of arranging your finances so that you can achieve your financial and personal goals in retirement.
It begins by defining your needs, objectives and current situation. Once these are established, your financial planner will prepare a broad strategy based on your goals. On your approval, a comprehensive financial plan will be implemented. This plan will take into consideration your current needs as well as plan towards meeting your retirement objectives.
When you consider that you could spend around one third of your life as a retiree, you start to realise the importance of having an effective retirement plan.
Your retirement payment is likely to be one of the largest lump sums of money you’ll ever receive. Whilst it may be tempting to use it to pay off the mortgage, go overseas or invest in the share market, you should carefully weigh up your options before deciding what to do. After all, this money has to last you all of your retirement years.
When you work out what to do with this money you also need to consider issues such as the taxation implications and the effect of your decisions on your ability to get the aged pension.
Individual circumstances differ and many of these issues can be complex and confusing. It’s therefore best to seek professional advice to make the most of your retirement payment. This is where retirement planning comes into play.
You should be free to spend your well-earned retirement doing the things you’ve always dreamed about. With the assistance of your financial planner, your retirement could include some of the best years of your life.
By putting in place a suitable retirement plan you increase the likelihood of living a financially secure retirement – maximising the returns on your investments as well as your eligibility for any social security entitlements.
Effective retirement planning also helps you take advantage of taxation benefits specifically established for retirees, such as:
- tax rebates;
- higher tax free thresholds; and
- zero taxation on earnings while funds are held in certain retirement income products.
The amount of money you receive will depend upon a number of variables, including the industry you work in and the number of years you have been employed.
Your retirement payment could include some cash benefits and what is known as an ‘Eligible Termination Payment ‘ or ‘ETP’. The government sets a limit on the amount of your retirement payment you can receive in cash - the remainder is paid as an ETP.
Your retirement payment may include all or a combination of the following cash benefits:
- part of your termination of employment payment;
- outstanding salary or wages (if your employment is terminated immediately); and
- any annual leave, long service leave or leave loading owing to you.
Certain parts of your cash benefit may be taxed at up to 30 per cent – this will substantially reduce the amount of money you actually receive.
The other part of your payment is called an Eligible Termination Payment (ETP). Your ETP will consist of your entire superannuation benefit and may include a discretionary payment from your employer. ETPs are subject to concessional tax rates and are the only portion of your payment that can be rolled over.
Rolling over means transferring your money from one approved rollover fund to another.
As part of the retirement planning process your financial planner will explain these components to you and recommend strategies to make the best use of the money you receive.