There’s no easy answer to how much is enough
I READ your articles with great interest. However I am often left wondering what assumptions underpin your projections. In particular, do you envisage spending down all capital over retirement or leaving it intact?
How much anybody needs for retirement is extremely difficult to work out because it depends on such factors as the state of their health, how much is spent on dining out and travelling, how long they live, and how often the kids put their hand out for help.
To make it more complicated, the age pension increases as the assets run down. I recommend a targeted capital sum of 14 times your expected expenditure but this is a very rough guide. This is why you should be guided by your adviser, and at least every year have a meeting to see if you need to revise your strategies. I AM 66, work 38 hours a week and intend to keep working for the next couple of years. I note an article by you on superannuation changes from 1 July, 2017 that stated to be eligible to claim post-tax super contributions as a tax deduction I would have to be under 65. I work 38 hours a week, therefore passing the work test, I presume any tax contribution I make to my super account will tax deductible. Correct? Yes, provided you do not exceed the caps. YOU recently explained that an individual with more than $1.6 million in superannuation can no longer make any contributions to super. If the individual is still working, does that mean that the employer no longer can make the required contributions to their account either? If that is the case, does the employer just keep that money or would they pay it to the employee in another form?
Once a person has more than $1.6 million in superannuation they are not allowed to make any nonconcessional contributions. However, employer contributions are concessional contributions, so extra concessional contributions are allowed up to the cap of $25000 a year. The cap includes the employer contributions. MY wife and I have a selfmanaged super fund. When one of us dies, you have advocated the survivor remove their own balance, as well the now inherited funds from the fund to avoid the 17 per cent “death tax”. Can the funds be transferred out of the fund as shares?
My recommendation to consider exiting the fund was if death was imminent and a large death tax would be payable because the funds were being left to a non-dependent. This is really a matter for the family.
But, assets can be transferred in-specie – just make sure you keep some cash in the funds bank account to smooth out any fluctuations in the share price on the day of transfer. Also, be aware that this tax applies only to the taxable component of the fund.
Noel Whittaker is the author of Making Money Made Simple and other finance books. His advice is general in nature and readers should seek their own professional advice before making any financial decisions. Email: email@example.com
This tax applies only to the taxable component of the fund