If you are over 55, here’s how you can lower your tax bill, boost your retirement savings, all of which will assist in a more comfortable life in retirement.
Workers aged over 55 have a unique opportunity to further boost their retirement savings. The main points of the strategy are as follows:
- Once you are age 55, you can start a pension with your superannuation and access your superannuation in the form of pension payments within limits. The taxable part of your pension income will be taxed at your marginal tax rate but will attract the 15% rebate between the ages 55 and 59. From age 60, this pension is tax free.
- The government halved the concessional contributions cap as of 1 July 2009. If you are over the age of 50 in the financial year, you can now salary sacrifice up to $50,000pa in that financial year until 30 June 2012 and the superannuation fund will pay tax at 15% on those salary sacrifice contributions rather than at your marginal tax rate.
The key is to structure a strategy through salary sacrifice so that your taxable income is around the level at which you pay the marginal rate of 15%, currently $35,000, which is the same rate your super is taxed. You then replace the sacrificed income with income from the superannuation pension.
These strategies are most tax effective for people who have a reasonable amount in superannuation and income. Furthermore, you should check if your employer can accommodate salary sacrifice arrangements and that they are able to make tax-deductible superannuation contributions.
If you’re over 55 and still working, we can help you set up financial strategies to:
- boost your superannuation as you near retirement, through the tax savings available
- reduce your hours of work but maintain your available income
- create a new lifestyle as you make the transition from full-time work to part-time work, and later to retirement.
To make sure you get the right advice that’s tailored to your personal situation, talk to one of our financial advisers.