Planning Process / Retirement Planning
Retirement Planning
Retirement is one of the most significant steps you will take in your life.
How long will you live?
Planned correctly your retirement can be the most rewarding part of your life.
A good way to approach retirement is to formulate a retirement plan that outlines your goals and objectives in retirement.
The purpose of retirement planning is to ensure that you will have a certain quality of life in your retirement. Each individual will have somewhat different objectives but almost all clients will have limited resources.
Account based pensions
1 July 2007 marked a new era for retirement income streams in
- They can only be purchased with superannuation money.
- A pension payment must be made every year.
- Income payable is flexible (subject to a minimum payment)
- They can be cashed out (in full or in part) at any time
- When cashed out they will be taxed as a superannuation benefit and are tax free from age 60
- The member can select the investment option and bears the investment risk.
- The member can outlive the capital so bears the longevity risk.
- There is no loss of capital on death.
- The member can nominate a reversionary beneficiary or have the balance paid to a dependant or the deceased's estate.
- Income and capital gains from the assets backing the pension will be exempt from tax.
- Assets backing the pension will count 100% against the Centrelink assets test.
- Income will be treated concessionally in the Centrelink income test.
Lifetime superannuation pensions and immediate annuities provide a regular income to the owner for his/her life or for the life of the last surviving joint owner (for ordinary money annuities).
Lifetime pensions and annuities are inflexible products and the client loses access to capital. Most contracts allow only a six-month period in which the contract can be cancelled. Once this period has expired the client usually cannot make lump sum withdrawals or cancel the policy.
If a reversionary annuitant is nominated in the contract, payments continue on the death of the original owner to the reversionary, generally for the rest of his/her life.
