Are you entering the ‘T-Zone’?
<Adviser’s Name>
<Date>
<Adviser name> is an Authorised Representative of RI Advice Group Pty Ltd
Disclaimer
Important Notice
RI Advice Group Pty Ltd, ABN 23 001 774 125, holds Australian Financial Services Licence Number
238429 and is licensed to provide financial product advice and deal in financial products such as: deposit
and payment products, derivatives, life products, managed investment schemes including investor
directed portfolio services, securities, superannuation, Retirement Savings Accounts.
The information presented in this seminar is of a general nature only and neither represents nor is
intended to be specific advice on any particular matter. RI Advice Group strongly suggests that no person
should act specifically on the basis of the information contained herein but should obtain appropriate
professional advice based on their own circumstances.
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Agenda
•
What is the ‘T-Zone’?
Also known as Transition to Retirement
•
The benefits to you:
•
1.
Boost your retirement savings in a tax effective way
2.
Ease into retirement by working less
3.
Pay off your mortgage sooner and more tax effectively
How we can help
3
What is Transition to Retirement?
Transition to Retirement pensions can allow you to:
 Income remains the same
 Boost retirement savings
 Income remains the same
 Reduce working hours
 Increase income
 Own home sooner
A tax-effective way to build on your retirement savings while maintaining
– or even improving your lifestyle!
4
Accessing your super
Date of birth
Age you may qualify to
access your super
Before 1 July 1960
55
Between 1 July 1960 and 30 June 1961
56
Between 1 July 1961 and 30 June 1962
57
Between 1 July 1962 and 30 June 1963
58
Between 1 July 1963 and 30 June 1964
59
After 30 June 1964
60
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The T-Zone model
Traditional model
Retire at age 65
Earned income
Superannuation income
‘T-Zone’ model
Preservation age
Earned income
Retire at age 65
T-Zone
Superannuation income
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How does it actually work?
$
Super accumulation phase
Pension phase
The
T-Zone
Salary sacrifice
Extra cash (0% tax)
9.5% SG
15% tax
on earnings
0% tax
on earnings
0% tax
on earnings
Time
7
Let’s take a closer look
We will now go through some case studies to explain how you can:
1
2
Boost your
retirement
savings
3
Ease into
retirement by
working less
Pay off your
mortgage
sooner
All with 0% tax on earnings to boost your super
8
How to save tax and boost your super
Salary sacrifice… and receive the same income!
Salary sacrifice
Salary
Cash salary
Superannuation fund
(accumulation)
Account
balance
Pension income
Account-based pension
(non-commutable)
Don’t forget there is 0% tax on earnings to boost your super!
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What are T-Zone benefits?
Net income unchanged
Boost super savings
Reduced tax
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Meet Elizabeth
Elizabeth is 55 years old.
•She earns $100,000.
•She has $220,000 in her super account.
•Elizabeth loves her work and is happy to work another ten years.
By age 65 Elizabeth’s retirement savings would grow to $543,202
if she does nothing...
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Elizabeth’s strategy
Implement a Transition to Retirement strategy, draw $16,000 from the pension and
salary sacrifice $20,000 into super.
The outcome...
•
Her salary falls to $96,000 (before tax) while she supplements her income
with pension payments.
•
Elizabeth receives the same income after tax.
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Elizabeth’s income position – Year 1
Any earnings on her pension account is now tax free
Without strategy
With strategy
$100,000
$100,000
Less salary sacrifice
Nil
($20,000)
Pension income
Nil
$16,000
Taxable income
$100,000
$96,000
Net tax and Medicare levy
$26,947
$22,987
Nil
$2,400
$73,053
$73,013
Salary package
15% pension tax offset
Net cash after tax
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Elizabeth’s retirement savings
Retirement savings on reaching age 60 are tax-free...
Without strategy
With strategy
If everything was left in super,
Elizabeth’s retirement savings
would grow to $543,202.
Retirement savings with strategy will be
$589,168, a whopping $45,966 more
than if she hadn’t used this strategy.
Retirement savings
Retirement savings
$543,202
$589,168
Assumption: Earnings at 7%, CPI at 2.5%, 9.50% SG paid on full salary package and no
loss of employment benefits.
15
How does Elizabeth benefit?
More savings for Elizabeth
Salary sacrifice taxed
at 15% not 39% or 34.5%
Pension payments tax-free from age 60
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How to ease into retirement
Meet Samuel
Samuel has a full time salary of $60,000 pa
Samuel has just turned 60
• Wants to start easing into retirement and has decided to only work 3 days a week.
• Samuel has $160,000 in his super account.
Samuel can afford to reduce his take home pay a little and use his super to soften
the drop!
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Samuel’s strategy
1. Reduce working hours and receive a reduced salary of $36,000 pa before tax.
2. Commence a Transition to Retirement pension to supplement this reduced income.
3. Draw $15,510 per annum tax free from the pension.
The outcome...
•
Samuel can still receive the same take-home income as he did working full time –
even after reducing his work hours.
•
This may start eating into Samuel’s retirement savings so long-term planning
is required.
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The outcome
Samuel can now work less – and earn the same income!
Without strategy
With strategy
Salary package
$60,000
$36,000
Pension income
NA
$15,510
Taxable income
$60,000
$51,510
Net tax and Medicare levy
$12,147
$3,657
NA
$0
$47,853
$47,853
Tax offsets
Net cash after tax
Assumption: Earnings at 7% .
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How does Samuel benefit?
Samuel works less hours but has same income
Superannuation guarantee
by employer
Pension payments tax-free from age 60
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Pay off your mortgage sooner and more tax-effectively
Meet Brian
Brian is 60 years old and earns $50,000 pa
•
Looking to pay off his mortgage before he retires in 3 years time.
•
Mortgage of $50,000 at 5.88% with monthly repayments of $553
(9 years to run).
•
Superannuation of $300,000.
If everything was left in super, after three years Brian’s balance would be $374,830
and he would still have a sizeable mortgage of $37,909...
Assumption: Earnings at 7%, CPI at 2.5%, 9.50% SG paid on full salary package.
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Brian’s strategy
1. Rollover super balance of $300,000 into a Transition to Retirement pension
2. Draw a pension of 4% or $12,000 p.a.
3. His financial adviser suggests Brian use all this as additional payments off the
mortgage
The outcome..
•
Brian gets to pay off his mortgage sooner.
•
Saves over $11,000 in interest payments.
•
He can retire when he plans to – without debt!
Assumption: Account-based pension return of 7.07% and superannuation return
of 7.00%.
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How does Brian benefit?
Without strategy
With strategy
• If everything was left in super,
after three years Brian’s balance
would be $374,830.
• Mortgage paid off in three years
instead of 9, saving $11,901
in interest.
• Mortgage would still be $37,909.
• Withdraw from super to pay mortgage.
• Account-based pension and
superannuation has a balance
of $344,108.
Net position $336,921
Net position $344,108
Assumption: Account-based pension return of 7.07% and superannuation return
of 7.00%, CPI 2.5%
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In conclusion
Recap of the T-Zone strategies we have covered
1
2
Boost your
retirement
savings
3
Ease into
retirement by
working less
Pay off your
mortgage
sooner
All with 0% tax on earnings to boost your super
Contact me to learn how you can personally benefit from the transition
to retirement strategy.
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Thank you for attending