Recently Orlando and Miranda turned 55 and wish to enjoy their retirement when they turn 65. Orlando earns $100,000 and receives 9% SGC ($9,000), while Miranda has not worked since having children. Orlando has a super balance of $500,000 whereas Miranda does not have any super. Their immediate need was to build up their retirement savings over the next 10 years.
We recommended that Orlando commence a transition-to-retirement pension with $350,000 retaining $150,000 in super. We recommended that Orlando salary sacrifice $16,000 to his super and replace that income with a minimum pension of $10,500 (3% in 2012/13). Note: Orlando will make full use of his annual $25,000 concessional contribution limit ($9,000 employer SGC and $16,000 salary sacrifice) each year.
Any surplus cash flow may be contributed to Orlando’s super as a non-concessional contribution, so long as it is below his annual $150,000 limit. We estimate that over the next 10 years they will be $89,853 better off.
Orlando and Miranda can transition to retirement knowing that they may continue enjoying their lifestyle whilst maxising their retirement savings. We continue to help them plan for the day they retire, so that they can face the future with confidence.
This is a hypothetical example based on a real client experience. Names and details have been changed.