Retirement Planning

Sunshine Coast Retirement Planning SpecialistsRetirement Planning and Advice from Ethica Private Wealth

Do you know how much money you’ll need in order to live the lifestyle you desire? Before you retire and give up the regular income you get from your job, you need to think about these important questions.

Ethica Private Wealth Specialists are able to provide you with retirement planning advice that considers your current situation and your future goals to help make your retirement something to be enjoyed not endured.

Here are some strategies we consider when developing and maintaining your retirement plans:

  • How to accumulate the required funds working within the cap limits that apply to taxable and non taxable contributions;
  • Timing your retirement including transition to retirement strategies;
  • Super co-contributions; and Strategies to maximise your Centrelink entitlements.
    • Approximately 8 in 10 Australians aged 65 or more get a full or part government means-tested age pension that is indexed to average weekly earnings and gets paid as long as you live.
    • You also get other valuable benefits if you’re eligible for the age pension.
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There are many factors involved in planning a comfortable retirement and accumulating enough wealth to enjoy a particular lifestyle. Among those factors are the following two key considerations that Ethica Private Wealth Specialists can guide you on.

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1) Ensuring enough risk in a portfolio

Too little investment risk can be just as dangerous as too much investment risk. In the following case studies we show you the difference risk plays in returns on investment.

Greg was afraid to take any investment risks to invest in shares or property, but knew the importance of saving for the future. He put $500 per month into a Cash Management Account, which was earning 5% per annum. He reinvested all interest received.

Georgia, on the other hand, understood the importance of investments that were more volatile and risky in the short term, but offered her better long-term returns. She invested $500 per month in a professionally managed share portfolio that only paid 3% per annum in fully franked dividends (which were reinvested) but it also grew at a compound rate of 4%.

  • Greg
  • Georgia

Both invested for 20 years and were both on a marginal tax rate of 30% over that time.

So, does the 2% additional return Georgia got by taking a little more risk make that much difference?

In Greg’s case, after losing 1.5% of his 5% return to tax each year, his final balance after 20 years is a healthy $164,000, $120,000 of which was his own contribution.

Georgia effectively paid no tax on her dividends and her final balance was $276,000. If she cashed in her investment, she would have a potential Capital Gains tax liability of just under $10,000, but would still have $100,000 more than Greg.

It works the other way as well. Many retirees think they need to ‘protect’ their retirement nest eggs by taking little or no risk. For instance, if someone had an allocated pension of $100,000 and was drawing $9,000 per annum, with a 5% per annum return, their money would last just over 16 years.

If slightly more risk were taken, so that the return averaged 7.5% over the long term, the investment would then last almost 24 years.

Find Out How the team at Ethica can help you structure the right balance of investments to give you the right balance of security and risk.

The team at Ethica Private Wealth Specialists would love to help with your investment planning and invite you to a free consultation to discuss your goals further.

Contact us on (07) 5443 5577 or complete the form below.

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2) Superannuation Contributions - How much and when?

When you contribute to super, the earnings are taxed up to a maximum rate of only 15% and the tax on capital gains is at a maximum of 10%. In comparison, the earnings of investments outside of super are taxed at the investor’s marginal tax rate, which could be as high as 49.0% (including the Medicare levy).

If you are looking to save from your after-tax income, an investment in superannuation will grow more quickly than the same investment outside of your super due to the lower tax rate, plus there’s no extra tax paid on the benefit when you retire.

If you’re able to contribute to your super from your pre-tax salary (sometimes called salary sacrifice), your super contribution will be taxed at 15%, but then the 15% tax on the earnings may still be considerably less than the tax on other investments.

The only drawback is that your super is locked away until retirement but if you’ve got the money to put away, super is a very efficient way to save.

Understand which are the most appropriate strategies for your retirement by contacting our office and arranging a complimentary initial consultation worth $440 or call (07) 5443 5577.

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