Sometimes the financial world can be overly complicated.
Identifying the issues that are important to your personal circumstances and determining what you need to focus on can be difficult. Given the difficulty involved the temptation can be to just keep things simple. But there can be a big difference between adopting a strategy that is simplistic, and one that is simple.
Take the case of Gary, who I met last week.
Gary is 64 years old, and can see the prospect of retirement approaching. He has restructured his working life in recent years and now works as a locum, which allows him to work in short bursts as and when he likes. This allows him the luxury of regular travel and means he doesn’t need to dip into his savings. Gary is fairly cautious in his approach to his finances, and he has kept his financial affairs straightforward, with the majority of his accumulated savings in his super.
Gary’s conservatism and desire to keep things simple has served him well in the past. He has accumulated a relatively large super balance, but because he hasn’t taken advantage of the opportunity to convert his super balance into a transition to retirement pension (TTR), he has potentially missed out. Gary had heard about using a TTR strategy, which allows you to draw a pension while continuing to work and contributing to your super, however, as he didn’t need any additional income from super to meet his needs he thought it wasn’t the right strategy for him.
Gary didn’t realise that using a TTR strategy makes the earnings on his super tax-free. In the past year, that would have saved his super fund about $16,000 in tax and during the last four years his super fund would have saved an estimated $64,000 in tax.
Gary, if he had used a TTR strategy, would have been able to enjoy an additional overseas trip every year.
If you’re aged over 56, you may be able to implement a TTR strategy – so the question becomes: what could you do with some extra income?
If you would like a second opinion on your current financial position or just want to see if you can make things more simple, please contact us.
General Advice Disclaimer: The information in this document is general advice only and does not take into account the financial circumstances, needs and objectives of any particular investor. Before acting on the general advice contained in this document, you should assess your own circumstances or seek general advice from a financial adviser. Where applicable, you should obtain and consider a copy of the prospectus or other disclosure material relevant to the financial product before making any investment decision to acquire a financial product. It is important to note that the price or value of financial products go up and down and past performance is not an indicator of future performance.
