I am a new retiree, just wondering if there is a strategy to best spend the money if you have them in Super, cash and shares?
1) Use up Super first before moving to cash and then sell shares?
2) Sell shares when the price is good, then go to Super and cash?
3) Spend all the cash first?
/WT
You don't know that.
I actually do know that… Look it up on the ATO website…
JV, dont be a dick.
Whytea isnt putting money into super, they are drawing down from it. So it turns our, you are wrong
So it turns our, you are wrong
Nope, I'm right.
The money they are drawing from has already been taxed… That's why they don't pay tax again…
It's no different to withdrawing from your bank account. That is not income, it is your money…
@jv: JV, please link relevant ATO article stating income drawn down from superannuation in pension phase is taxed.
Or STFU
@jv: I'm calling you out JV, where is the article that states income from super is taxed in pension phase?
Otherwise concede you were wrong, and dont act like a dick next time you comment if you dont know the answer.
@hothed: JV just get's into intentional arguments so he can report people to the mods for fore breaking the 'personal attacks' rule. Dude has too much free time.
Who's to say it's been taxed going into the fund?
Ever heard of a non-concessional contribution?
Ever heard of a non-concessional contribution?
Then that would have been taxed when you earned the money, and don't get a tax benefit when you deposit in the fund.
Any interest from that gets taxed whilst in the fund…
@jv: Could have been funded from tax free sale of PPOR- CGT free or other asset purchased before 1985.
Nonetheless, the earnings and pension payments from an account based pension is tax free.
Hey don't forgot to continue our conversation that I was quite enjoying at https://www.ozbargain.com.au/node/620531#comment-10930121
Could have been funded from tax free sale of PPOR- CGT free or other asset purchased before 1985.
Therefore it is exempt from tax…
It will not get taxed when you withdraw when you withdraw at retirement because all taxes have already been paid…
@jv: But income can be tax free before it went into super.
Income from sale of CGT free assets.. or the person worked and earned only $21k per year, maybe they received an inheritance tax free.
Contribute this tax free income to super as non-concessional contribution- no tax going in. Commence an account based pension valued at less than $1.6m. Income and earnings tax free.
Did I mention tax free?
@jv: The reason it is not taxed has nothing to do with the fact that it has already been taxed. It is purely an arbitrary policy decision by the government. Withdrawals from pension used to be taxed at 15%.
The confusion here comes from the word "income".
In one sense you might call taking money from super as income. In another sense, earning dividends and interest inside super is income.
Withdrawing from super is not really "income", but I think this is the sense of the word that hothed was using.
In any case, an account in pension phase does indeed pay no tax on earnings within the fund. There is also no tax on withdrawls. So, income in any colloquial sense of the word from pension has no tax.
Compare your Super account with your bank account. Assume you withdraw $1000 from each of them each month. None of this money is taxable. HOWEVER any interest earned in your bank account IS taxable while any earnings in your Super account IS NOT taxable. That is why Super accounts can be better than bank accounts in retirement.
while any earnings in your Super account IS NOT taxable.
LOL. Of course they are taxed…
The fund pays tax on earnings…
@jv: In accumulation phase the fund pays tax on earnings. In retirement phase the fund DOES NOT pay tax on earnings. Look it up and educate yourself :-). Apology accepted.
What Is The Best Way to Spend Them in Retirement?
Pokies…
@jv You continue to meet my expectations.
First, see a financial advisor. Together with them work out a suitable plan that you understand and are comfortable with. Second, enjoy retirement. p.s. don't use the "free" FA that your bank may offer. You need to see a private FA that you pay by the hour. Likely you will get one free appointment with them, so use that to decide if you like their vibe, as you will likely see them every year for the duration of your retirement. Also, google their name to make sure they don't have a string of unsatisfied customers….
First, see a financial advisor.
You shouldn't be giving financial advice in these forums…
I'm not, it's lifestyle advice ;-)
Everyone's situation is different, it might be worthwhile consulting with a Financial Adviser who can help you minimise any tax payable and maximise your income.
Everyone's situation is different
Not necessarily… Some will be very similar.
1) Hookers.
2) See above.
Get it right.. it's hookers and coke! š
Get the amount of money in your Super, divide it by 45k, then buy as many Rav4 Hybrids as you can at fleet cost.
Resell them to ozbargain people for 55k to avoid 6month wait time.
This is REAL Financial Advice! Would advise keeping the residual RAV4's once you've broken even and putting them up for hire for UBER drivers and make $250-300 p/w. That way you have the same amount of cash as you started off with, and have FCF to spend on Hookers/Booze
Generally, there's a minimum % you have to withdraw from Super, but very broadly and generally you want as much of your money in there as possible as the tax environment is better, as people approach retirement lots of people end up contributing non-concessionally as well to take advantage of this.
Depending on your specific circumstances things can change a little around the edges.
There's a minimum withdrawal from what you have transfered into a retirement income stream, not the super account.
With very few exceptions you will want to transfer as much of your balance into pension phase as possible anyway, because accumulation phase is taxed at 15% and pension phase is tax free. So effectively once youāve 100% retired thereās not going to be a distinction for the average joe.
There are balance caps and things but if youāre at that kind of balance you definitely need professional advice.
I think the problem here is using the word "super". It's helpful to use the correct terms.
You could say super account in accumulation phase vs super account in pension phase.
I think when he said "withdraw from super" he really meant "withdraw from an account based superannuation account that is in pension phase"
best spend the money if you have them in Super, cash and shares?
Cash first. Because you don't get capital appreciate or dividends.
Then it doesn't really matter. Best is if you can live off dividends.
You'd want to get in under the asset means test to get part pension for the concession card.
Either pay to see a financial planner or if it is uncomplicated even you tax accountant could help (but they are not allowed to give financial planning advice, just tax advice)
I would convert my super into pension phase. Maximise tax free benefits
Then progressively sell the high capital gain shares while I don't trigger tax. I won't wait for a high to sell, but will avoid selling at a low.
I will maintain a year worth of buffer in cash, so I only need to sell shares at short notice
It also depends what is your current age, if you have a spouse, if they are retired too, and their age. Reason I say this depending on how you structure your income and assets, it can get you very different outcomes with pension entitlement. If you get minimal pension, then you might be eligible for concessions cards, which may get you concessional price on various services and utilities. There is a lot to consider here. Probably do more research and seek out a professional, or even free advisors from Centrelink or your super fund.
You should have asked this question about 10 years back.
It's impossible to give an answer without knowing your balances, age and longevity outlook.
I finish work next January. I'll live off dividends and savings for about a year and then start a tax-free retirement income stream from my super balance. I'll draw that down until I'm eligible for the aged pension somewhere in my early 80s.
I'd see what gearing you could use to ensure you get a government pension.
Iām currently in a similar situation. We are living off our savings, at the moment, so we can leave our Super untouched for as long as possible. We, also, have other shares so we are getting some dividends off them to supplement. However, where possible we dividend reinvestment to get more shares. Talk to a financial adviser about the best way to do this for you.
Fiat is a liability. It would be good risk management to get rid of that first.
Then get rid of the low performing assets. Rebalance the portfolio, accumulate and hodl high gainers and/or tech assets that are changing the world.
You can leave money in a super (accumulation) account and access as needed.
There is also something called an Income Stream (pension) type account and some of these funds have tax-free investment returns which is why some people move their super into this product. But there is a minimum you need to drawdown according to your age
https://www.ato.gov.au/Rates/Key-superannuation-rates-and-thā¦
Best to chat with a financial advisor.
Itās complex, but really worth learning about. Start by reading about the tax structures, govt benefits and concessions, and then get assistance to choose the right approach to super for your circumstances. There are numerous good locally written books, and some good websites (some are paid sites). A good paid adviser can get you started, but I suggest you keep researching and learning about what they guide you on. We got a written plan in 2005 that suggested a strategy - not products - and followed it through into retirement. That cost $500, and a further $500 a year later to review it. With all the regulations now it is like to cost several thousand - so learn as much as you can by reading first and asking lots of questions. We later also engaged an accountant who specialised in super to assess the details of some options - he suggested we consider taking the options with the best āsleep factorā - which we did. If someone is directing you to products be very careful that an overall strategy that meets all your circumstances, interests and future needs has been considered.
Good luck and find some fun things to spend your time and money on!
Just cash it all in. What are you waiting for. $1, $2 rise next week. Your cash is doing nothing, and depending on your shares, just get it all out.
Bank accounts earn interest which is taxable.
Private share holdings earn dividends & capital gains which is taxable.
Super accounts in retirement phase earn dividends & capital gains which is NOT taxable.
Hence Super accounts have an advantage for retirees. One potential downside however is when the retiree dies, proceeds from a super fund distributed to beneficiaries may have tax imposts greater than proceeds from a bank account. This is why sensible estate planning with a qualified financial advisor can be worthwhile.
When you first retire you want to make sure you are aware of how long your money will last, both in Super and out of it.
I agree that you should save Super till last, but remember that you are forced to withdraw a % of your Super each year as you get older.(Govt rule). This is because the Govt doesnāt want you passing on any of your Super to your dependents/children.
Also remember that if you have any cash in a Super Fund acc with a Bank, and you die, the money is Taxed at 17%. So make sure you partner is aware of this, and withdraws it if you are in poor and degrading health..
Also whilst there maybe some good Financial Advisers who will have your interest at heart, I have found that their primary interest is to make commissions and money for themselves, then you come in after that.
So you need to talk and discuss with friends and others, to get ideas and opinions, on what is available, and what are the pitfalls when making financial decisions.
Remember, you are asking for financial information, and not financial advice.You need to be officially qualified to give financial adviceā¦..
Financial planners and advisers charge from $250-350 per hour.
So what you do is attend some of the free seminars that are around to become knowledgeable about finance.
Once you know your way around a bit you will find it becomes easier to work with.
Lastly if you want to still control your own money, or some of it, consider a SMSF.
There is plenty of info on other forums which can assist you.
Some reasonable comments on here. Keep your super locked up & (hopefully) growing until you really need it. Having said that, like everyone else you will have a tax free allowance ($18,200 pa), so make full use of that if you can (CGT strategy if selling shares, property etc.)
One thing that really bothers me is the kop out from most people who immediately say āget a financial advisorā. This assumes that FAās know better than you & have your best interests at heart. Neither of those is really correct. What people should be telling you (as a few comments have) is āget financially literateā. Teach yourself about the basics by researching them. I have spent time educating myself on this subject and I can say thereās an awful lot I donāt know.
There is no single place or book that seems to deal with this subject. Plenty of places quote the rules (you need to know those to avoid making mistakes), but very few places act as a one stop shop for pension planning. Itās probably because itās such a minefield of legislation and you can get into trouble if you mislead. The best way to start is to familiarise yourself with the basic rules for drawing a pension. Review your position, ask around and try to dig out specifics related to your situation. If necessary, pay for advice, but it is unlikely to be needed if you have done your research.
I'm only 35, so not a retiree. However my understanding is that income from superannuation is tax free. Adopt minimum withdrawals.
Draw down on assets outside super first, where you pay taxable income.
If you have significant capital gains, it would be better off to spread out the sell down over multiple financial years.
Strategy would probably depend on how much super you have.
Refer "Superannuation Sweet Spot" https://www.moneymag.com.au/only-need-253k-super-to-retire
Hopefully that has given you a few things to think about.