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Speaker 1: Start here. Should we be staggering our retirement to help

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Speaker 1: our money last longer? Answering all of your questions about

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Speaker 1: commencing allocated pensions and age pensions to help maximize your

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Speaker 1: financial peace, comfort and longevity. Hi everyone, and welcome back

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Speaker 1: to start here, the mini series within Sugarmuma's Fireplay, where

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Speaker 1: I answer your real life money questions with practical, empowering

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Speaker 1: steps to help you move forward with confidence and clarity. Now,

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Speaker 1: today's question is an important one, and I honestly wish

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Speaker 1: and pray for more couples asking this and having these conversations,

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Speaker 1: regardless of actually how far away retirement really is. All right,

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Speaker 1: let me go straight to this listener question. Hi, canna

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Speaker 1: love this mini series start here, so thank you. My

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Speaker 1: husband and I are sevent years apart, fifty three and sixty.

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Speaker 1: My husband has seven hundred and eighty thousand dollars in

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Speaker 1: super and I have two hundred and ninety thousand dollars

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Speaker 1: in super. We are both working full time but looking

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Speaker 1: to retire within the next five years. Together, we have

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Speaker 1: noticed recently that a lot of our friends are staggering

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Speaker 1: their retirement dates because of the cost of living and inflation.

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Speaker 1: Impacting their retirement plans dramatically. We always plan to pull

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Speaker 1: up stumps together, but now we're wondering if we should

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Speaker 1: be doing the same as our friends. I know that

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Speaker 1: you can't give personal advice, but what should we know?

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Speaker 1: What should we be thinking about, and what should we

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Speaker 1: be getting advice on. Okay, first of all, this is

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Speaker 1: a fantastic question because retirement planning is no longer this

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Speaker 1: perfect simple stop work at sixty finish line. It's very

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Speaker 1: much about timing strategy. Its attack strategy, is a super

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Speaker 1: innuation strategy, is a sindling strategy, and it's most importantly

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Speaker 1: a lifestyle strategy. Now, as I mentioned, I can't give

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Speaker 1: personal advice, but what I can do is break this

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Speaker 1: down into key technical, financial, and strategic considerations so that

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Speaker 1: you walk into your financial planning appointment informed, educated and empowered,

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Speaker 1: and you waste no time at all asking the right

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Speaker 1: questions and getting the best answers for yourself. So I'm

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Speaker 1: going to break this down into some clear sections so

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Speaker 1: it's really easy to follow. So we're going to start

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Speaker 1: with why more and more retirees are looking to stagger

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Speaker 1: their retirement, Like, what's really going on? Well, the answer

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Speaker 1: is is essentially inflation and the increased cost of living.

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Speaker 1: It's changed significantly and it looks like this is a

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Speaker 1: trend that's least here to stay for the short term. Also,

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Speaker 1: we all know that superannuation balances need time to grow

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Speaker 1: and compound. You know, time is our friends, So this

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Speaker 1: becomes a bit of an issue when you're looking at

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Speaker 1: getting close to retirement because you don't necessarily have as

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Speaker 1: much time up your sleeve. And then there's often the

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Speaker 1: situation where one partner earns more than the other. You know,

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Speaker 1: there's an experienced financial planner. It's very rare to see

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Speaker 1: a couple where they earn equal amounts. And then of

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Speaker 1: course you add in an age gap between a couple

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Speaker 1: and that creates timing opportunities but also can create timing issues.

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Speaker 1: And then there's tax and centrelink rules that can help

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Speaker 1: create windows, but they can also sometimes dictate strategies. So

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Speaker 1: in this case, you're seven years apart and that age

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Speaker 1: gap alone opens up lots of different planning opportunities and

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Speaker 1: ideas and retirement planning in Australia there really revolves around

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Speaker 1: three key ages which everybody should know and understand. So

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Speaker 1: let me quickly break them down. So age sixty is

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Speaker 1: when you can access your super if you have retired,

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Speaker 1: and I'll go through how that's drawn down, but it's

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Speaker 1: typically taken tax free through drawing down on an allocated pension.

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Speaker 1: The second age that you need to understand is age

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Speaker 1: sixty five and that's when you can access your super

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Speaker 1: regardless of whether you are working or not. And then

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Speaker 1: age sixty seven is when you can eligible for the

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Speaker 1: government's age pension. Now these milestones matter enormously, so the

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Speaker 1: question becomes, are we trying to retire at the same

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Speaker 1: time for emotional reasons or are we trying to structure

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Speaker 1: this for financial benefits such as longevity or quality of lifestyle.

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Speaker 1: You know, that's where this shift happens. So now that

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Speaker 1: we've asked that question, let's unpack the technical side. And

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Speaker 1: this is where a lot of people get a little

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Speaker 1: bit apprehensive because it feels very unclear. So when you

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Speaker 1: retire and you start drawing from your superannuation, you usually

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Speaker 1: start with what's called an account based pension, also known

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Speaker 1: as an allocated pension. Now here's what it means. In

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Speaker 1: very simple terms, your superannuation move from being in accumulation

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Speaker 1: phase where your employer has been depositing their twelve percent

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Speaker 1: and it gets shifted into what we call pension phase. Now,

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Speaker 1: when you were in or when you were when you

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Speaker 1: are in accumulation phase, your earnings are taxed at a

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Speaker 1: maximum of fifteen percent, and the capital gains are also

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Speaker 1: taxed at fifteen percent unless they've been health for more

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Speaker 1: than twelve months, then they're taxed at ten percent under

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Speaker 1: the current legislation. But when you move into pension phase

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Speaker 1: it gets a lot better. The investment earnings are actually

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Speaker 1: taxed at zero percent yep. Zero. That is incredibly powerful

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Speaker 1: because once your supermove is into pension phase, the income

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Speaker 1: generated it inside that pension is tax free. Now here's

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Speaker 1: where age matters. If you're over age sixty, pension income

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Speaker 1: payments are tax free to you personally. Now this is

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Speaker 1: important because the capital gains tax within pension phase is

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Speaker 1: also z zero. So what this means is it can

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Speaker 1: help your funds last a lot longer and obviously grow

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Speaker 1: if invested correctly without the eroding penalty of tax both

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Speaker 1: income tax and capital gains tax. So if you're between

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Speaker 1: preservation age, which for most people now is age sixty

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Speaker 1: and of course fifty nine or in between preservation age

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Speaker 1: and sixty, depending on your birth year. Pension payments have

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Speaker 1: a taxable component, although you often receive a fifteen percent

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Speaker 1: tax offset. So say you're drawing a pension and you're

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Speaker 1: say fifty eight or fifty nine, and you've met a

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Speaker 1: condition of release, your pension income isn't yet tax free,

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Speaker 1: but it will be when you turn age sixty. So

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Speaker 1: turning age sixty or older, super pension income is generally

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Speaker 1: tax free, which is incredibly advantageous. And that's why super

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Speaker 1: becomes less abstract and more real at this stage of life.

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Speaker 1: And you know, you start to realize that super just

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Speaker 1: isn't a number on a statement anymore. It actually becomes

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Speaker 1: your financial lifeline, and your passive income serves you for

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Speaker 1: your long term financial independence, which is really important. Now,

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Speaker 1: there's something called the transfer balance cap. Now this is

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Speaker 1: currently sitting around two million dollars, and you've got to

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Speaker 1: be careful because it is index periodically. But this is

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Speaker 1: the maximum amount that you are allowed to transfer into

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Speaker 1: a tax free pension phase. Anything above that amount must

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Speaker 1: remain in accumulation phase and continue to be taxed at

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Speaker 1: the normal fifteen percent. So say you've got two point

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Speaker 1: four million dollars and SUPER. When you're moving it into

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Speaker 1: an allocated pension, two million dollars would be rolled forward.

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Speaker 1: The remaining four hundred thousand would stay in accumulation phase.

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Speaker 1: So when we talk about staggering retirement, we're not just

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Speaker 1: talking about timing here. We're talking about timing the pension

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Speaker 1: phase and the pension access that it works in a

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Speaker 1: tax efficient way and a tax efficient way for your needs,

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Speaker 1: both immediate and well into the long run. Now here's

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Speaker 1: where you're seven year age gap becomes really interesting. If

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Speaker 1: the older person retires first, they may be able to

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Speaker 1: start a pension, which means they can then access that

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Speaker 1: tax free income, and it means that the younger person

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Speaker 1: may still continue on working. And importantly, if the younger

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Speaker 1: person is under age pension age, there SUPER is in

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Speaker 1: accumulation phase, so it does not count under the center

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Speaker 1: Link assets test. Now, this is often referred to as

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Speaker 1: asset sheltering, So in very simple language, SUPER held by

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Speaker 1: someone under age sixty seven isn't actually counted for age

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Speaker 1: pension testing by Centerlink. If one of you reaches age

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Speaker 1: sixty seven before the other, there can be a window

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Speaker 1: where super can be strategically positioned. And that doesn't mean

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Speaker 1: you're manipulating anything or breaking the law. It just simply

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Speaker 1: means understanding how timing really does change your eligibility. And

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Speaker 1: this is why staggering retirement can sometimes increase your age

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Speaker 1: pension or even part age pension eligibility, your concession card,

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Speaker 1: access healthcare savings, and of course like cash flow stability,

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Speaker 1: and even a small age pension entitlement means that you've

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Speaker 1: unlocked a pensioner concession card, which means thousands of dollars

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Speaker 1: per year in medical and living cost savings, and that

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Speaker 1: is not small. Now let's talk about this five year

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Speaker 1: window before retirement, because this is like a golden time

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Speaker 1: because once you stop working naturally, obviously your contributions opportunities

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Speaker 1: reduced or completely vanished. You no longer have your employer

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Speaker 1: putting money in. So there are some additional strategies that

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Speaker 1: can actually become really important as you prepare for retirement.

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Speaker 1: So I'm going to quickly break them down for you.

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Speaker 1: The first is the concessional contribution. So the current concessional

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Speaker 1: cap is thirty thousand dollars per year and that includes

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Speaker 1: your employer contributions, any Saturday sacrificing that you might make,

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Speaker 1: and of course your personal deductible contributions. If you haven't

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Speaker 1: actually used your full cap in the last five years

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Speaker 1: and your total that I can't reiterate the importance of

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Speaker 1: total superbalance is under five hundred thousand dollars, you may

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Speaker 1: actually be eligible to use the catch up concessional contribution

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Speaker 1: and this allows you to use up to five years

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Speaker 1: worth of contributions, So that can be really powerful, especially

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Speaker 1: if you've got one partner with a much lower account

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Speaker 1: balance like we do have in this particular circumstance. With

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Speaker 1: this listener, the next thing is to understand about what

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Speaker 1: super splitting is. So one spouse can transfer up to

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Speaker 1: eighty five percent of their concessional contributions to the other

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Speaker 1: spouses super Now, this can really help, I guess, spread

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Speaker 1: the balance between the two over time. And of course

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Speaker 1: then there's the downside of contributions, which is probably one

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Speaker 1: of the most popular strategy being used right now. So

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Speaker 1: if you are fifty five or older and you sell

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Speaker 1: your family home that you have lived in for at

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Speaker 1: least ten years, you may be able to contribute up

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Speaker 1: to three hundred thousand dollars each into super. Now there's

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Speaker 1: no work tests required, there's no total superbalance limit to this,

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Speaker 1: and you've got to know that you have to contribute

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Speaker 1: this within ninety days of settlement. But you've also got

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Speaker 1: to keep in mind that you only get one opportunity

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Speaker 1: to do this in your lifetime and it doesn't actually

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Speaker 1: contribute towards any of the non concessional contribution cap So

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Speaker 1: it is a very powerful strategy for boosting your super,

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Speaker 1: particularly if there is an imbalance. So timing really does matter,

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Speaker 1: and that's where you really want to have your ducks

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Speaker 1: lined up between an accountant, a financial planner, a lawyer,

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Speaker 1: and of course your real estate agent if you're looking

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Speaker 1: at doing this. And I do have a separate episode

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Speaker 1: purely dedicated to it understanding this into so much more detail,

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Speaker 1: so I highly recommend going and listening to it. And

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Speaker 1: of course this could dramatically boost your super and reshape

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Speaker 1: your tirement living if you're willing to downsize and you've

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Speaker 1: got plenty of equity there to capitalize on. So now

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Speaker 1: that's bring it back to the emotional question. Here in

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Speaker 1: your message, you explained to me that you planned on

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Speaker 1: retiring together that's not to be ignored. That really does matter.

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Speaker 1: But here's the real question. If one of you worked

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Speaker 1: for say another two years, would that remove financial stress

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Speaker 1: for you completely? Would that help improve your pension eligibility?

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Speaker 1: Would that boost super materially? Would that help reduce anxiety

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Speaker 1: around money? Would that allow the other to retire earlier?

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Speaker 1: Sometimes staggering retirement, even just for a short period of time,

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Speaker 1: say twelve months to twenty four months, can significantly change outcomes,

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Speaker 1: and sometimes it's actually not worth it at all. And

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Speaker 1: that's why you need to look at modeling and modeling

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Speaker 1: and comparing and getting a financial planner to run all

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Speaker 1: the numbers, run all the projections, and look at all

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Speaker 1: the what if scenarios to help you see what is

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Speaker 1: right view. So you need to sit down with a

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Speaker 1: financial planner sooner rather than later, and ask them, you know,

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Speaker 1: what happens if we both retire together in five years.

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Speaker 1: What happens if you know, one of us retires at

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Speaker 1: age sixty and the other one at say age sixty three.

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Speaker 1: What happens if we delay retiring by say one or

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Speaker 1: two years. How does this impact our age pension? How

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Speaker 1: does this impact our allocated pension? How does this change

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Speaker 1: our tax situation, How does this impact our cash flow sustainability?

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Speaker 1: How long will our money last? How much longer will

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Speaker 1: And of course is this enough for what we need?

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Speaker 1: Because retirement isn't actually about the year that you stop working.

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Speaker 1: It's about whether the money lasts thirty years or maybe

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Speaker 1: even beyond when you think about medical technology. So when

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Speaker 1: you meet with your financial planner, take these questions. How

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Speaker 1: much income will we need each year after tax? How

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Speaker 1: long will our superannuation last under different scenarios, and what

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Speaker 1: happens if markets fall early in retirement? And when should

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Speaker 1: each of us start a pension that is an allocated pension?

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Speaker 1: And should we be using all of these various catch

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Speaker 1: up contributions or downsizing our home or should we be

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Speaker 1: looking at rebalancing our superannuation investments. Perhaps they're too aggressive,

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Speaker 1: perhaps they're too conservative. This is what a financial planner

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Speaker 1: is going to work with you and help fix. And

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Speaker 1: should we be considering a transition to retirement strategy where

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Speaker 1: you do actually commits an allocated pension, but you also

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Speaker 1: continue on working but salary sacrificing at the same time,

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Speaker 1: putting back in what you essentially are drawing out. The

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Speaker 1: more clarity that you have here, the calmer you are

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Speaker 1: going to feel. And of course you need to be

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Speaker 1: aware of all the caps and making sure that you

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Speaker 1: are safely staying within those caps, which also includes looking

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Speaker 1: at options of any of your assets perhaps outside of SUPER.

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Speaker 1: Perhaps you have a share portfolio, perhaps you have an

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Speaker 1: investment portfolio. Perhaps it is time to look at maybe

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Speaker 1: moving those assets into SUPER. But of course after getting advice,

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Speaker 1: particularly around triggering capital gains and moving costs like commissions, brokerage,

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Speaker 1: legal fees and so forth. So should you stager your

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Speaker 1: retirement maybe perhaps, but not because your friends are doing this,

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Speaker 1: and not because it's a financial lifestyle trend right now,

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Speaker 1: but because it fits your numbers. It strengthens your financial stability,

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Speaker 1: it increases your tax efficiency, it protects your financial independence

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Speaker 1: both today and well into the long run. You know,

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Speaker 1: retirement is not a competition, it's not a race. It's

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Speaker 1: a transition, an important passage, I think, and when structured thoughtfully,

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Speaker 1: a staggered approach could actually be really strategic rather than stressful.

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Speaker 1: But it really boils down to clarity, that's the key,

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Speaker 1: not comparison. So thank you to this listener for sending

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Speaker 1: in such a thoughtful question, and for anyone else listening.

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Speaker 1: You know, I've popped my email address in the podcast

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Speaker 1: notes so you can send through your own start here question.

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Speaker 1: And as always, if you could do me a huge favor,

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Speaker 1: leave me a rating and a review and send this

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Speaker 1: episode to any of your family members or friends that

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Speaker 1: are approaching retirement and wondering about all the different options

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Speaker 1: that will work for them and helping their money last

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Speaker 1: as long as possible and give them that comfort, peace

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Speaker 1: of mind and independence. Hello, everyone, thank you so much

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Speaker 1: for listening to Start Here. I'll catch you next Monday

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Speaker 1: morning on Sugar Mama's Fireplace