Retire with more or retire sooner?

The choice is yours with a Transition to Retirement strategy.

TRANSITION TO RETIREMENT (TTR) - AS A SUPER BOOSTER

The Super Booster lets you save more super without having to reduce your take-home pay. Sounds too good to be true, right?

With this option, you continue to work full time, make salary sacrifice contributions to your super and top up your reduced take-home pay with income from a Transition to Retirement pension account (such as iQ Retirement™).

Your salary sacrifice super contributions are taxed at 15% instead of your individual income tax rate. In most instances a retirement account is taxed more favourably than salary and wages. This means you could potentially contribute more to super than you withdraw, without changing your take-home pay.

It’s a great option if you haven’t been in the superannuation system for a long time and have a retirement savings gap to close in the last years of work.

BENEFITS OF THE SUPER BOOSTER

  • Take-home pay remains the same
  • Increase your super balance
  • Save on tax.

MEET STEVE

How Steve saved over $3,000 in tax and added this to his super savings

Steve, 60, is still working full time, earning $70,000 plus his super guarantee contribution, and plans to retire when he is 65. With five years up his sleeve he wants to bolster his retirement savings. While he will be limited by his concessional contributions cap of $25,000 for 2017/18, he opens an iQ Retirement account so he can start a Transition to Retirement strategy and salary sacrifice more into his super.

Steve salary sacrifices as much of his salary as possible, into his existing super account, and draws down an amount from his retirement account, so that he still has the same amount of money on which to live. The maximum he may draw down is 10% of his pension account.

Over the 2017/18 financial year Steve can save over $3,000 in tax and contribute this to his superannuation by putting it straight into his iQ Retirement account. This strategy is tax effective, because income payments from a pension account are tax free for people aged 60 and over (investments earnings on the assets will still be subject to the same maximum 15% tax rate that applies to super accumulation funds).

INCOME POSITION Current situation With a TTR
Gross income $70,000 $70,000
Less salary sacrifice $0 $(18,350)
Taxable income $70,000 $51,650
Less tax payable^ ($15,697) ($9,141)
Add (tax free) pension payment $0 $11,794
TAKE HOME PAY $54,303 $54,303

SUPER POSITION Current situation With a TTR
Employer contribution $6,650 $6,650
Salary sacrifice $0 $18,350
Total contribution $6,650 $25,000
Less contributions tax ($998) ($3,750)
Less pension payment $0 ($11,794)
SUPER POSITION $5,652 $9,456
The illustration above is based on the tax rates and limits applying for the financial year 2017/18 (Income Tax includes the Medicare Levy). The superannuation guarantee is 9.5% and, for the 2017/18 financial year an individual can make a before-tax contribution of $25,000. Low income tax offsets have been ignored for the purpose of the above illustration. Source: Russell Investments. This illustration is general in nature and is not prepared having regard to your objectives financial situation or personal needs.
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