I’m 64, a self-employed freelance creative writer, own my home, and have $93,000 in super, $110,000 in my access account and $170,000 in savings.
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I → ’m → savings
I intend to keep working, as I love my work, but I don’t expect any massive income from that – and it will also drop off as I age.
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I → intend → that
It’s been pretty difficult to get to this point, and it’s taken many sacrifices, but owning my own home is fantastic.
I will reach pension age in August 2029.
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I → get → August
To maximise my pension and associated benefits, should I make the maximum $32,500 super contribution, plus the $23,000 of available catch-up contribution, or would I be better keeping that money in the bank?
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I → maximise → bank
Firstly, well done on what you’ve achieved.
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you → do → what
Building this level of financial security on the variable income that often comes with freelance creative work is impressive.
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that → build → work
The next point to note is that money inside or outside of super doesn’t make a great deal of difference to your age pension entitlement.
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money → note → entitlement
Either way this wealth will be included in the asset and income test, and the calculation methodology is usually identical.
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methodology → include → test
The advisability of making tax-deductible super contributions, including the catch-up contributions, depends on your level of taxable income.
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advisability → make → income
Money that you send to super as a concessional contribution is taxed at 15 per cent when it arrives in the fund.
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it → send → fund
For you to get a benefit therefore, your personal tax rate must be greater than this.
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rate → get → this
There is no tax payable on your first $18,200, and then 17 per cent is payable from their up to $45,000 (inclusive of Medicare levy).
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cent → be → levy
Meaningful gains through tax-deductible super contributions therefore don’t accrue until your income is above $45,000.
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income → accrue → 45,000
This does not mean you shouldn’t contribute to super.
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you → mean → super
But it may be that making after-tax contributions (non-concessional in super jargon), produces a better result for you.
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contributions → make → you
My wife and I are both retired with account-based pensions and are contemplating moving from our large, high maintenance home into a more suitable abode.
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wife → retire → abode
This will either require purchasing land and building anew or purchasing an existing dwelling and undertaking major renovations.
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This → require → renovations
Regardless, our preferred approach is to purchase and build/renovate first, then sell and move in when ready.
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approach → purchase → ?
Given the only funds to which we have access are in our account-based pensions, is there a cost-effective way of funding this swap without using an expensive bridging loan or having the majority of proceeds of the sale locked out of super?
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majority → give → super
Depending on the amounts involved, potentially you could withdraw monies out of super, and then replenish using the downsizer provisions.
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you → depend → provisions
Downsizer contributions require that the home you are selling has been yours for at least 10 years.
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you → require → years
You can contribute $300,000 per person through this mechanism.
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You → contribute → mechanism
Importantly, there is no age limit on downsizer contributions, though you can only do this once in your lifetime.
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you → be → lifetime
If you are under 75 years of age when you sell your current home, you may also be able to get money back into super via non-concessional contributions.
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you → sell → contributions
Spreading the contributions over a couple of financial years, you could potentially get up to $520,000 each back into super and then create new account-based pensions.
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you → spread → pensions
Alternatively, it may be that bridging loan costs are just one of the many costs that need to be factored into this transaction.
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that → bridge → transaction
Advice given in this article is general in nature and is not intended to influence readers’ decisions about investing or financial products.
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Advice → give → investing
They should always seek their own professional advice that takes into account their own personal circumstances before making any financial decisions.
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that → seek → decisions
Expert tips on how to save, invest and make the most of your money delivered to your inbox every Sunday.
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tips → save → inbox
The Aporia
