Until recently, 55 was the 21 of the Super world. It was a significant milestone that flagged the end of your working life and the start of access to your superannuation benefits. However, legislative changes in 2015 saw the introduction of a timeline for a gradual increase in the preservation age. Under the new rules, anyone born after July 1, 1960 will have to wait longer to get their hands on their Superannuation.  Depending on your birth date you may not be able to access Super until you’re 60. Of course, that means more time for investing with Super and ensuring a comfortable retirement.

Weighing up the risks

Managing your finances can be time consuming and stressful, particularly as you transition into the next phase of your life. Seeking help from a financial adviser will ease the pressure and ensure that you have a sound investment strategy.  Elston Private Wealth  adviser Alex Rose says your financial objectives and lifestyle goals will play a big role in determining your risk requirement and asset allocation when investing with Superannuation. “In particular, the investment strategy will also be driven by the time frame required until you need to access Super as the primary source of income in retirement,” Alex says.  Ideally, investment strategies for those in the 55 plus age group will involve the minimum risk required to achieve their objectives for income and longer-term growth. “However, the risk required must be balanced with each individual’s attitude to risk and ability to recover from adverse investment outcomes,” Alex says. “A typical strategy for the over 55 age group is to migrate assets into the Super environment to create a tax effective asset base and generate tax free income in retirement. This specifically includes maximising both concessional and non-concessional contributions to Super.”

Topping up your Super

As you near preservation age, additional Super contributions help ensure you have enough capital to support your retirement. New rules around extra contributions will take effect on July 1. The changes include restrictions on non-concessional, or after tax, contributions. NCCs are an effective way to move money, such as a lump sum from a property sale, inheritance or redundancy pay out, into a tax-free environment. Under new rules the annual NCC limit has been lowered from $180,000 to $100,000. The “bring forward limit”, which currently allows those under the age of 65 to make three years worth of NCCs in one hit, will also be reduced from $540,000 to $300,000. And, anyone with a Super balance of more than $1.6 million can no longer make any NCCs after June 30. “These changes mean you need to consider getting money into super earlier so it can grow within that environment over time,” Alex says. “We work with clients to proactively navigate changing Super legislation and develop investment strategies.”

Easing into retirement

Many people over 55 choose to take a gradual approach to retirement by reducing their working hours and using the government’s Transition to Retirement policy to supplement their salary and maintain a comfortable lifestyle. Others use the policy to boost their Super while they are still working. The concept allows people under 65 who are still working to transfer their Super monies into a pension account and withdraw up to 10 per cent of the balance each financial year.  Alex recommends those drawing on a TTR have an investment portfolio with an appropriate level of defensive assets (cash and fixed interest). “This means short term income requirements are being taken from defensive assets, not growth assets that should be left to provide longer term growth in the portfolio,” he says.

Meeting changing needs

Investing with Super is not a “set and forget” exercise. Your investment strategy should be regularly reviewed to ensure it is the best option for your current life phase and what lies ahead. As you near your  preservation age, liquidity becomes an important issue in light of meeting minimum pension requirements. “For example a Super fund invested in a single real estate asset while in accumulation phase may have difficulty meeting minimum pension payments once Super can be accessed,” Alex says. “Also, one off lump sums may be harder to fund. It is important a Super fund in pension phase has significant liquidity and diversity including cash and fixed interests to meet short term income requirements.”

Elston takes a holistic approach to combine strategic advice with a predominantly direct asset approach to deliver optimal after tax outcomes for clients over 55. For further advice call us on 1300 ELSTON or email info@elston.com.au.