How to Minimise Tax and Maximise Your Retirement Fund

In retirement, you want to have the time and money to be able to enjoy the things you love in life. 

Retired individuals, especially those who reach their mid-retirement phase, need to be proactive about their finances. 

Australians are living longer than ever before and with this increased life expectancy, comes a longer retirement. While this can be a dream come true for some, for others, they are worried if they will be able to afford it!

Commonly, financial priorities change throughout our lives and retirement is no different. Many people entering retirement consider ways they can reduce their taxes. Distributing your money in tax-effective investment structures – like superannuation – will help you save the money you need for your desired lifestyle.

Financial planning advice may help you find the best strategies to reduce your taxes whilst in retirement. There are common key phases people go through post-career, which reveal some tax-effective strategies that can help set up the lifestyle you want in this new time of your life. 

When is the Best Time to Think About Tax in Retirement?

You cannot think of retirement as just one part of life. Most people’s retirement will last over 20 years! With retirement being such a big part of your life, many advisers break it down into 3 specific stages of retirement:

• In early retirement, people have higher energy levels; they want to explore new passions, visit friends and family, and travel.
• Mid-retirement is usually when many people like to start to slow down. They start downsizing by purchasing smaller homes that don’t need much upkeep. Their priorities start to shift again—instead of spending on trips; they start spending on health and wellness. 
• Finally, late retirement is when things like careful financial planning, estate planning, and aged care planning become crucial.

Each phase requires some element of financial planning. The sooner you think about it, the more chances you will create more financial freedom for yourself in the future. 

One of the ways you can plan for your future is by making the most of your investments today. You can do this by salary sacrificing into your super; or maximising your concessional contributions. Both of these methods can help you save tax and maximise your nest egg!

Here are 2 Ways You Can Save on Tax in Retirement:

Obtaining Insurance through your Super Fund

Many retirees choose to set up their insurances through their super fund. At the moment, employer default super funds must provide a minimum level of insurance. Many people get their insurance through their super since it may provide a better rate or simply for convenience.

Typically, you pay the premium for these policies from the balance of your super account. As such, it’s important to plan how your insurance money will affect your retirement. By paying more to cover the cost of premiums today, you may be able to gain the most out of your retirement savings.

Pay Less Tax by Maximising Your Super Contributions

Contributing to your super – especially using a salary sacrifice strategy – can help minimise tax and boost your super balance. 

Salary sacrificing involves contributing some of your pre-tax wage to your super fund. 

Concessional contributions are taxed at 15%. 

In a single financial year, you can contribute as much as $27,500. This cap applies to all individuals regardless of age. By contributing close to the maximum amount, you can significantly minimise the annual tax you have to pay. Simultaneously, you are giving your super balance a healthy boost to better prepare you for your golden years.

The best time to think about retirement is now.

It’s never too early to begin your retirement plan. You don’t have to wait until you’re about to retire to start thinking about how you can reduce taxes. The earlier you plan, the better for your finances. Starting today and taking steps toward your retirement will help you create the lifestyle that you truly want.

At Blue Financial, we go the extra mile to help our clients succeed. We provide financial advice for retirement in Ballarat, enabling our clients to live their ideal life through adequate defensive assets and a wide range of investment structures and strategies. 

Book an introductory chat today to learn more!

General Advice Warning: This article contains information that is general in nature. It does not take into account the objectives, financial situation or needs of any particular person. You need to consider your financial situation and needs before making any decisions based on this information.