From wills to long-term budgeting, there’s a lot to think about when making your retirement to-do list. Here’s some tips to make sure you’ve ticked all the boxes.
1. Check your will
Without a valid will, an administrator will be appointed to manage your estate, which may cause your family plenty of problems. To save them the stress, ask a solicitor to draw it up for you and make sure you and two witnesses sign it.
2. Plan your estate
Think of your estate plan as your family’s stress-free action plan that they can turn to for guidance when you pass away. It should cover all of your documents, contacts, debts, bills and assets so your family can easily figure out what to do with them.
3. Budget for the long haul
Australians are living longer than ever – which means your retirement savings also need to last longer. Create a long-term budget that will help you live the lifestyle you want – and don’t forget about healthcare costs. Then comes the most important part of a budget – sticking to it.
4. Invest in your future
From boosting your superannuation to investing in shares, understanding your investment options can make a huge difference to your retirement savings. When you start investing – and you should start early – make sure you have a mix of investments to spread your risk.
5. Be wary of scams
Investment scams are on the rise in Australia, with perpetrators directly targeting retirees to access their superannuation funds. Protect yourself by never giving out your financial details over the phone or by email. And be suspicious of anything that sounds too good to be true.
6. Start thinking about insurance
Many insurance policies expire at a certain age, leaving you without cover. And if yours comes from your superannuation fund, it could be eroding your savings. From age-based insurance policies to products that cover funeral expenses, you should seek professional financial advice to develop a plan that is appropriate for you as you enter retirement.
The Government has legislated changes to the Age Pension rules from 1 January 2017, which it estimates will see 300,000 Australians lose all or part of their pension entitlements.1
If you are retired or about to retire, some careful planning now may put you in shape to access at least a part Age Pension. Here we outline some strategies to consider.
Building up the super of the younger member of a couple
If you are retired and have a spouse who has not reached Age Pension qualifying age, making contributions to your spouse’s super account may be beneficial. This is because super in the accumulation stage is not counted towards the Age Pension assets or income tests until the member reaches Age Pension qualifying age or begins an account-based pension.
Gifting
Gifting money (for example to a family member or charity) can help to reduce your assessable assets. The Government has set a limit of $10,000 per financial year for a single person or a couple, limited to a total of $30,000 over a five-year period. If you are planning to gift more than the allowable limits, check the rules here as penalties may apply.
Pre-paying a funeral plan
While it is not something that everyone would like to consider, pre-paying for a burial plot or funeral expenses can make good financial sense. As well as saving your family expense when you die, prepaid funeral plans and burial plots are not assessable assets for Age Pension purposes.
Using certain income streams
Certain annuities are assessed more leniently under the Age Pension rules than other investments, which may help you to achieve a higher level of Age Pension.
When purchasing a term annuity, you can select the proportion of capital (residual capital value) you would like returned to you at the end of the investment term. Annuities with a residual capital value of less than 100% are generally assessed favourably under the income and assets tests.
Speak to your adviser for more details as the rules differ depending on when an income stream was commenced, its term and your life expectancy.
Summary
If you are concerned about how the upcoming changes to the Age Pension rules will affect you, arrange a meeting with your financial planner who can help you to structure your income and assets to make the most of your entitlements.