Live the life you want today, tomorrow and every other day
If you’re not age 60 yet you may or may not be thinking about your wealth or lack of wealth in super. My question is, if you aren’t thinking about it and have not thought about the lifestyle you wish to fund as you scale back on work, how can you be sure you will be able to afford the lifestyle you want?
With the right planning and advice, you can identify what lifestyle you are wanting to be living now, tomorrow and every other day. If you set measurable and realistic wealth goals with the right plan and approach you can not only ensure these goals are met but also have the peace of mind that the lifestyle you may be used to living today or want to be living today will continue to be funded into your later years in life.
As a superannuation and self managed super fund (SMSF) specialist adviser I’ve helped many people with this very problem. I’ve found that many people with SMSFs have not been getting the best or the right advice. On occasion, no time has been spent by their accountant or adviser to truly understand them and their overall goals and needs. Instead short term strategies and the cheapest structures are put in place, that don’t consider the ‘end game’ (the final use of an asset or need for cashflow, or estate wishes and tax consequences). Wealth in super can be a significant part of a person’s overall wealth and if it is not given the right attention you could find yourself with wealth trapped outside of super that would be better held in super on lower tax rates or zero tax rates. In some circumstances, you may even find you could have had access to Centrelink support had you accumulated wealth in super instead of outside of super.
With all that in mind, due to limits on contributions, you can’t just say, “I’ll leave it until I get to retirement age and then start building my wealth in super”, as it may be too little too late to get the wealth in.
If you get it right by the time you can access your super you could find yourself taking a pension of say $120,000 with no tax to be paid on this income personally, and no tax on income earned in your superannuation fund. Compare this to earning $120,000 in investment income in your personal name and you would be up for personal income tax of $34,432 (based on 2018 financial year tax rates for an individual and including Medicare levy). This would only leave you with $85,568 to spend. What a difference it can make to your lifestyle if you get this right and have the best strategies in place. You may not be eligible for Centrelink in this example but your lifestyle and longevity of your wealth would be much safer and achievable.
If you wish to discuss your own superannuation or SMSF strategies, contact the specialist PKF Superannuation team in Newcastle on (02) 4962 2688 or in Sydney on (02) 8346 6000.