Time has caught up and suddenly you’re 60! You’ve worked for most of your life, provided for your loved ones and now you’re thinking it’s time to relax and buy that sports car you’ve always wanted, or maybe go on that once in a life time trip.

As the 7th ranked country in the world when it comes to life expectancy, behind only Japan, Italy, Switzerland, Iceland, Israel and Sweden, you can expect to live until around 81 if you’re a bloke and almost 85 if you’re part of the fairer sex. That means the average person will spend 20 to 25 years in retirement.

 

How to create an income stream in your retirement

If you’ve decided to retire at 60 and no longer work you will need to organise a plan that will support you for the rest of your years. There are several options and you will need to speak with your financial adviser to consider an appropriate option for your individual circumstances. Here are some considerations to create an income stream in retirement:

  • Account based pension – You’ve spent decades contributing to your superannuation account and haven’t been able to touch a cent. This is the time when it all pays off. You can convert your Superannuation account, otherwise known as an ‘accumulation account’ into an income stream by opening an account based pension (allocated pension). If you are 60 or over and decide to retire permanently your benefit is tax free. There is a minimum annual withdrawal of 4% and you can organise your payments as you wish; fortnightly, monthly, bi-annually or yearly.

 

You might love what you do and decide to ease into retirement or simply need to continue to work due to financial commitments. If you are between ages 55 to 65 years you may decide to set up a ‘transition to retirement’, this will allow you to draw down up to 10% of your super per annum.

 

  • Annuities – Some of us may need a secure way to create an income stream rather than being able to access a lump sum. You may need an avenue where you get paid a guaranteed income stream. Annuities will give you a fixed payment for a nominated number of years in exchange for a lump sum. Another advantage is if you are over 60 you do not pay tax on investment earnings.

 

  • SMSF – You can organise an account-based pension or a transition to retirement (TTR) pension through your SMSF. Most people adjust their asset allocation leading up to and during retirement as it’s important they have enough cash and liquidity to cover their pension and any unforeseen expenses.

 

  • Property – Investing in property is one of Australia’s pastimes. Many of us may have set up an SMSF where we have invested in property for our retirement which is one of the most tax effective vehicles. Others may have invested in several different properties throughout adult life and built up a nest egg for retirement income. It’s important to note, there is no right or wrong with either investment strategy and it’s a clear example of how different investments suit different people and their tolerance to risk.

 

  • Centrelink Age Pension – Since 1909 the government has provided basic support for those of us of qualifying age of 65. The pension age will rise to 67 years of age by 2023. It’s worth noting that in 1909 the male life expectancy was 55; so needless to say, the system did not support the 2.4 million recipients it does today.

 

For those of us who cannot fully support ourselves through retirement the age pension helps with living costs and to be eligible you will need to meet some stringent requirements as the pension is asset and income tested. If you require assistance going through the maze of paperwork to receive either a full or part pension we can assist. You may be entitled to the Commonwealth Seniors Health Card if you satisfy an income test even if you may not be eligible for an age pension.

 

  • Term Deposit – You may choose to have some funds in an income term deposit and have your interest payments paid periodically. This is a simple way of receiving investments returns.

The sooner you plan for retirement the more options you’ll have to create the retirement lifestyle that you’ve dreamed of; if your plan is to put a sign on your door “Gone Fishing”, call us to plan a strategy to make it happen. DFG Wealth (03) 5976 8426.