Are you nearing retirement age? If so, you know you don’t need to retire to start claiming your super.
Ease your way into retirement by drawing on your pension with a Transition to Retirement Pension.
Retirement is a big decision. It should be when all your saving and investments pay off.
But some people dream of retiring, only to find themselves at a loose end when the time comes; they can’t imagine giving up everything they have worked so hard to achieve.
If this sounds like you, you may choose to stay active and save more super by working for longer.
In this case, you could investigate setting up a Transition to Retirement Pension. It allows you to ease you into retirement, withdrawing up to 10% of your super account balance every year.
This extra money can help you ease into retirement or super-charge your super, while claiming certain tax benefits. To find out more, read below.
Reduce your tax
There are definite tax incentives for setting up a Transition to Retirement Pension. When you start drawing on your super in the form of a pension, your SMSF will change into its ‘pension phase’.
In the pension phase, any investment returns you make on your super will not be taxed, allowing you to make more money today while saving for tomorrow.
Over the age of 60, you won’t pay any tax at all on pension incomes. In the years before, from the Preservation Age to 59, you will still receive tax rebates.
Wean yourself off work
Just because you are nearing retirement age, doesn’t mean you have to give up work cold turkey.
One of the key benefits of a Transition to Retirement Pension is that you can keep on working and gradually step back.
Use the pension to supplement your income as you start to reduce your work hours and pave the way to retirement.
As soon as you turn 65, or retire, your transition pension will turn into an account-based pension and you will enjoy even greater tax benefits.
Strengthen your super
Not everyone is financially prepared for an early retirement. Increasingly, individuals are working past 60 to save more for their retirement.
The Transition to Retirement Pension rewards you for your few extra years of work. Instead of cutting down your hours, you can continue to work full-time while living off your pension benefits.
You can even use the extra money to make voluntary pre-tax super contributions or investigate new investment strategies.
Because your super fund is in pension phase, your super returns will not be taxed. This will let you greatly contribute to your super in the years leading up to retirement.
ESUPERFUND makes it easy to establish a Transition to Retirement Pension.
We will walk you through setting up a self-managed super fund and claiming a pension, to help make your transition to retirement as smooth as possible.
If you want to learn more about SMSFs, download an today.