For most Australians, their 60s is the decade that marks retirement. For some this means a graceful slide into a fulfilling life of leisure, enjoying the fruits of a lifetime of hard work. However, for many it means a substantial drop in income and living standards. So how can you make the most of the last few years of work before taking that big step into retirement?
If 50 really is the new 40, then life has just begun. The kids are gaining independence or may have left home, and the mortgage could be a thing of the past. Bliss. But galloping towards you is… retirement!
Typically your forties is a time of established careers, teenage kids and a mortgage that is no longer daunting. There are still plenty of demands on the budget, but by this age there’s a good chance there’s some spare cash that can be put to good use. As you pass the halfway mark of your working life, it’s time to give retirement planning a bit more attention.
If you are in your thirties, chances are life revolves around children and a mortgage. As much as we love our kids, the fact is they cost quite a lot. As for the mortgage, this is the age during which repayments are generally at their highest, relative to income. And on top of that, one parent is often not working, or working only part time. Even if children aren’t a factor, career building is paramount during this decade.
Are you really expected to think about super at a time like this? Well, yes, there are a few things you need to pay attention to.
Superannuation is for the oldies, right? In some ways that’s true, but even in your twenties, there are good reasons to take a bit more interest in your super. The average 25-year-old has around $10,000 in super, but the decisions you make now, even with relatively small sums of money, could earn you hundreds of thousands of extra dollars over your working life.
2018 has already been a turbulent year for the global economy, with recent volatility in the stock market sparking some concerns for the future. So what major factors are currently influencing the Australian and international economies – and how will these shape the year ahead? Here are some of the economic trends everyone’s talking about.
On Wednesday 23 November 2016, the Federal Government’s proposed changes to super rules were passed by Parliament. This means that from 1 July 2017, the amount you can put into super each year will be reduced – which could impact your retirement plans. So before the changes happen, it’s a good idea to consider whether you should contribute a bit extra to your super.
Non-concessional contributions cap: 500K lifetime cap replaced by new annual cap
The Government has announced that the 2016-17 Federal Budget proposal to introduce a lifetime non-concessional cap of $500,000 will not go ahead. In its place, the Government has proposed the introduction of an annual non-concessional contributions cap of $100,000 per year.
New annual non-concessional cap
From 1 July 2017, the Government has proposed lowering the annual non‑concessional contributions cap from $180,000 to $100,000. In addition, individuals with a balance of more than $1.6 million will no longer be eligible to make non‑concessional contributions.
The bring forward rule where individuals under age 65 are eligible to bring forward 3 years of non‑concessional contributions will still be available.
The $1.6 million threshold will be based on an individual’s balance as at 30 June of the previous year. Individuals with balances close to $1.6 million will only be able to bring forward the annual cap amount for the number of years that would take their balance to $1.6 million.
Transitional arrangements will apply. Where the non-concessional bring forward has been triggered but not fully used before 1 July 2017, the remaining bring forward amount will be reassessed on 1 July 2017 to reflect the new annual caps. It may, therefore, be beneficial to take advantage of the $540,000 non-concessional cap this financial year as it will be reduced from next financial year.
Other proposed changes
In the Government’s media release, it was also announced that they will not proceed with the proposal to remove the work test requirement for contributions for those aged 65 to 74. Individuals between 65 and 74 will be eligible to make annual non-concessional contributions of $100,000 if they meet the work test, but will not be able to access the bring-forward provision.
In addition, the commencement date of the proposed catch-up concessional superannuation contributions will be deferred by 12 months to 1 July 2018.
Contact us to find out how this may affect you.
Disclaimer: This article has been prepared by Count Financial Limited ABN 19 001 974 625, AFSL 227232, (Count) a wholly-owned, non-guaranteed subsidiary of Commonwealth Bank of Australia ABN 48 123 123 124.
Information in this article is based on current regulatory requirements and laws, which may be subject to change. While care has been taken in the preparation of this document, no liability is accepted by Count, its related entities, agents and employees for any loss arising from reliance on this document.
This document contains general advice. It does not take account of your individual objectives, financial situation or needs. You should consider talking to a financial adviser before making a financial decision.