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Helping clients make the transition to retirement
One of a financial adviser’s chief roles is to prepare, and then guide, their clients through retirement. The earlier advisers can start this process, the better the outcome is likely to be for the client.
In 2022 130,000 Australians retired at an average age of 64.8 years old*. The average superannuation balance for males in the 60 to 64 age group is $402,838 and for females it is $318,203 but a lot can still be done in this age bracket to help retirees make the difficult transition to retirement **.
“As financial planners, we’re always encouraging people to start planning early – it’s never too soon to start. And by giving people a sense of how they’re shaping up with big ticket items, like their mortgage and their retirement savings, we can often help clients to firstly take action, and secondly take the optimal actions to maximise their results,” financial planner and director at AGS Financial Group, Alex Berlee, says.
“The earlier you start planning for retirement, the better off you will be,” financial planner at Green Associates Trina Wood adds.
This means that clients should consider taking advantage of strategies like bring forward contributions sooner rather than later, especially if their fund balances are below the required limits as outlined in the tables below.
Concessional contributions
Total superannuation balance as at 30 June of the prior financial year | Annual contribution limit | Bring forward available |
Less than $500,000 | $30,000 | Members can access their unused concessional contributions caps on a rolling basis for 5 years. Amounts carried forward that have not been used after 5 years will expire. |
Non-concessional contributions
Total superannuation balance as at 30 June of the prior financial year | Contribution and bring-forward available |
Less than $1.66 million | Access to $360,000 cap (over 3 years) |
Greater than or equal to $1.66 million and less than $1.78 million | Access to $240,000 cap (over 2 years) |
Greater than or equal to $1.78 million and less than $1.9 million | Access to $120,000 cap (no bring-forward period, general non-concessional contributions cap applies) |
Greater than or equal to $1.9 million | Nil |
Source: ATO
“Education plays a key role here. There are plenty of tax concessions to support increasing superannuation balances while people are working,” financial adviser and director at Saikal-Skea Independent Financial Advice, Andrew Saikal-Skea, says.
Wood stresses that it’s important that clients understand the benefits of making small regular contributions early on in their working life.
“For example, an average wage earner who adds $100 per fortnight to their super, will see their pay reduced by $65, a mere coffee per day. With every pay rise, increasing that contribution incrementally makes a huge difference twenty years from now,” she says.
Saikal-Skea has also found that properly engaging with what real retirement lifestyle outcomes will look like for clients can provide motivation for people to fund a prosperous retirement, rather than a more constrained one.
“This leads to a better balance between pre-and-post-retirement lifestyles,” he says.
Financial planners also have a role to play in just keeping their clients accountable to their own stated goals.
“Having a third party to keep you accountable and on track is invaluable for a lot of clients. Life can get in the way but having an annual (or more) review with a financial planner can keep you on track and help you adjust your strategies as required,” financial planner at Fiducian Macarthur, Renee Hush, says.
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