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Transition to Retirement Recent Posts

How Can It Benefit Me?

The easiest way to illustrate how a Transition to Retirement strategy can benefit you is to think about it in very straight forward terms. For the purposes of the example, I will assume the following:

  • You earn between $37,001 and $80,000 per year
  • You are in the 32.5%(Plus Medicare)  tax bracket
  • This example applies in the 2014 - 2015 Financial year
  • All figures are rounded
  • Rules regarding Minimums and maximum pension draw downs have been ignored for the purposes of the example

Whilst this can appear to be complicated, it is really really simple. I will use $1.00 of income in your pocket as an example.<

To illustrate this example, I will assume your top marginal tax rate is 32.5% plus medicare. This applies to income between $37,001 and $80,000 per annum.   To get $1.00 in your pocket, you need to earn $1.50 before tax. Because your top marginal tax rate is 32%+ medicare you will have to pay the ATO 0.50c in tax (or about a third)

TTR allows you to put the $1.50 into your Superannuation. But you have gone without $1.00 of take home salary. The same TTR rules allow you to take the missing $1.00 from your Super in Pension phase to offset the missing dollar. The profit is the 0.50c.

Of course there is tax payable into the Super fund on the $1.50 contribution. This is taxed at 15% (22.50 Cents). The net of tax benefit to you is twenty seven and a half cents. or an instant benefit of 27.50% profit.
In reality, the whole process is a bit more complex than this simple example. Specialist advice on the suitability of a Transition to Retirement strategy is required.
Further, to quantify the potential benefits of this strategy, there are a whole range of factors that need to be taken into account and this is where we can make this whole process straightforward and easy to understand.

By taking the same approach to your own circumstances as we did in the example above, we are able to quantify benefits and assist with the implementation of a Transition to Retirement strategy if this is indeed the right strategy for you.