Money in the Next Third

Money in the Next Third introduces the small things people can do to make a meaningful difference to their retirement outcomes.

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Money in the Next Third


presents
presents
Money in the Next Third

In our lifetime we'll spend

7 years lying awake waiting to sleep

We'll spend

6 months in the shower

And we'll spend

5 months complaining and 4 months laughing
But how long do you think you'll spend in retirement?
  • It could be
  • 0
  • years

About one third of your life.

That's as long as you spend sleeping

So when it comes to your future, let's make sure you're not asleep

Are you prepared for

The Next Third

of your life?

What is the next third?

It's simply the next phase of your life, the retirement part

  • The First Age
    An era for dependence, socialisation, and learning.
  • The Second Age
    An era for independence, responsibility, and working.
  • The Third Age?

    An era for personal achievement and fulfillment after retirement.



That might seem far away
But over half of us will end
up retiring earlier than planned
Earlier
0%

When expected
0%

Later
0%


And only 11% of over 50s feel very well prepared for retirement
  • Somewhat prepared
  • 42%
  • Somewhat unprepared
  • 21%
  • Very unprepared
  • 19%
  • Not sure
  • 7%




Early retirement can happen for a number of reasons
Health issues

Health issues

Caring for a loved one

Caring for a loved one

Losing a job

Losing a job

Everyone's path to retirement is different

But we can all do something to prepare
Watch
Dale's story
Shall we talk about money?

(don't worry it's not scary)

Australians would prefer to talk about anything but money
  • 19% Politics
    24% Death & Religion
    28% Money

But since superannuation is probably your biggest asset after your home

It's something worth discussing

When we do talk about money and retirement, our concerns are:

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How much will I need?

It might not be as much as you think

Learn about the
$1 million myth
How long should it last?
Make your money
last the distance
How will I fund my retirement?

Your super is only one slice of the pie

See what other
slices you may have

You may not feel prepared,

but it's not too late, or too early to change things for the better
Follow
Chrisoula's story
Are you ready?

There's still time

Just a few tweaks can help you sort your super whilst you're working
You can put all your super into one account and save on fees
Why combine
your super?

Read Fiona's
lost super story
You can add more to boost your retirement savings
Pre-tax contributions
Learn more

Post-tax contributions
Learn more

And after you retire, a retirement income account can make your money go even further

We call ours Choice Income
See how
it works

With Choice Income you can:

Enjoy regular income just like a pay packet
Flexible retirement income, such as:
  • Fortnightly, monthly or quarterly? You choose. 1
  • You can choose how much you want to receive.2
  • Get additional payments. After all, it's your money.3

With Choice Income you can:

Feel reassured that our investment experts are managing your money

With Choice Income you can:

Make your money work harder

See what this means for:

A balance of
$75,000

A balance of
$300,000

With Choice Income you can:

Enjoy tax benefits

See what this means if you're:

Over 60

Under 60
How can I prepare for the next third?
How much did you say?

Do I really need $1 million to retire?

You've probably heard the mantra that a magic $1 million is needed to live how you want when you retire. But having $1 million in retirement savings isn't normal, or even necessary for all. Everybody has different ideas and means for their retirement. There is no magic super number.

How much money you need to retire really does rely on your personal situation. Suggestions you need $1 million for life after work ignore the role of the Age Pension. We know that seven out of ten older Australians receive either a part or full Government Age Pension1. So it is unlikely that super will be your only source of retirement income.

Arriving at your own retirement number starts with preparing a budget. You'll have to plan for daily expenses and even for unexpected costs. And how much money you'll need to retire will also depend on any outstanding debts you have. Maybe you are part of the 60% of Australian home owners who are still paying off their mortgage.2

To start working out how much you might need for retirement, you may wish to consider:

  1. Your day-to-day expenses
  2. Whether you can expect any entitlements from the Government
  3. The kind of lifestyle you want to lead when you retire
  4. How long you'll spend in retirement

Start planning your retirement figure now with help from us:

Speak to someone

AGE PENSION CALCULATOR

Learn more

1 Australian Bureau of Statistics, 3101.0 Australian Demographic Statistics, June 2016
Department of Social Services, DSS Demographics March 2017 (2.5 million receive Age Pension)
2 Calculated using 2016 Census data



How long should my savings last?

Are you ready for a retirement that could last well into your 90s? Australians are living longer thanks to better nutrition, public health and medical advances. Living longer also means you might enjoy a longer retirement.

Here's what the latest life expectancy data from the Australian Government shows:

(Compiled from Australian Life Tables, 2010-2012, Australian Government Actuary. Released 2014. Next update expected 2019)

But also we might live beyond our life expectancy. Did you know:

  • 40% of women who are 65 today are estimated to live to at least 90
  • 26% of men who are 65 today are estimated to live to at least 901

Generally, everyone saving for retirement wants their super to last the distance. The tricky part is predicting how long you'll live and then how much money you'll need. Life expectancy calculators use a lot of data to estimate how long you might live so it could give you an indication of just how many years to prepare to spend in retirement. But it's important to remember algorithms play the averages and can't predict how long you will actually live. So it may be better to estimate that you will live longer than the average when calculating your retirement income needs.


Start planning with help from us:

Start planning

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1 These probabilities are based on the Australian Life Table 2010-12 downloaded from here: http://www.aga.gov.au/publications/life_table_2010-12/



See the difference just a small amount of super can make

Where will the money come from when you retire? The answer is not just from super. A combination of your super, rental returns from a property, shares or even a casual job may fund your retirement. But for many Australians the Age Pension and super will provide their income in retirement.

How you access your super can have a big impact on your retirement, especially if you are eligible for the Age Pension. Take this example:

Topping up - Jennifer's super story
Meet Jennifer. She is single, owns her home and has saved a super balance of $100,000 throughout her working life. She decides to retire at 65 and, after completing the Age Pension Estimator on the Centrelink website, finds out she is eligible for the full Age Pension. She could withdraw all of her super at once but doesn't want the responsibility of managing such a large sum of money. Instead, she decides to draw an income from her super to top up her Age Pension entitlement.

Now, let's assume Jennifer lives to 90. After all, the statistics tell us there's a four in 10 chance she will. Jennifer could expect an average weekly income of $100 over and above her Age Pension entitlement. That's a 21.5% increase in retirement income provided by her super.

Drawing an income from your super to supplement the Age Pension can make a big difference to the amount of money you have each week. Have a look at the table below:


The above information in Jennifer's story is provided to give you an idea of how your super might work with the Age Pension in retirement. To make these calculations, we had to make some assumptions. These are listed for you below:

  • Super balance is transitioned to a retirement income account which earns 5.5% p.a. in investment earnings net of investment fees (and tax on investment earnings is nil)
  • Retirement income account fees of $1.50 per week and 0.11% of account balance (max $750% p.a.)
  • Total income comprises the Age Pension and super drawdowns, and is the level amount the member could receive (in real terms) over the drawdown period
  • Payments from the retirement income account are assumed to occur over 25 years and conforms to Government-prescribed minimum drawdown requirements
  • Age Pension rates, asset/income test and rules/thresholds as at 23/08/2017
  • Assume the member is a single home owner when calculating the Age Pension entitlement
  • The Age Pension and total income are assumed to increase each year at 3.5% p.a.
  • All results are show in today's dollars by discounting at 3.5% p.a.
  • Calculations ignore any non-super assets


Start planning with help from us:

Learn more



'I have peace of mind'

How Chrisoula made her super work harder

Chrisoula Markopoulos had always been good with money. As she approached her 65th birthday, she needed to make the big decision on how to use her super and live the retirement she always wanted.

A warm smile greets us at the door. Chrisoula Markopoulus is meticulously groomed and has just pulled a perfect orange cake out of the oven. Proud of her heritage, the 67 year old has maintained her strong Greek accent ever since arriving in Australia with her father when she was 16.

Soon after she arrived in Melbourne, her father longed for Europe and returned. Chrisoula stayed, married, raised three children, worked as a seamstress and later went on to work in aged care.

After 25 years, the marriage came to an end and the couple sold their Doncaster home in the process. She had always been good with money, but now she became particularly savvy. 'You have to be strong when you're by yourself. It's not easy,' she says. Motivated to take control of her finances, Chrisoula went on to become a keen property enthusiast, subdividing a block of land and building two townhouses.

A few months prior to her 65th birthday, Chrisoula wanted to speak to a professional about what she could do with her super. She sought advice from AustralianSuper. "It was very important to me that I could sit down with someone" she says.

Natashya, an advisor with AustralianSuper, helped her understand what was required to get her super in the right place in the months leading up to her retirement. 'She made me feel comfortable immediately, like we had known each other for a long time. I trusted her', Chrisoula recalls. Natashya also helped her to set up a retirement income account so she could draw a tax-free income from her super. 'I have peace of mind,' is how she describes receiving the regular payments.

She is now enjoying her retirement years. But finishing paid work has not slowed her down. There's more time for cooking and long walks, and she's always looking for the next real estate opportunity. Chrisoula can often be spotted talking to local agents to find out what's happening in the market.

Whatever she chooses to do next, Chrisoula enjoys the comfort of knowing that her retirement income is being managed by investment experts at AustralianSuper. 'I check my super balance regularly and I am very happy,' she beams.


Start planning with help from us:

See advice options

The views expressed in this article are those of the member and not AustralianSuper. The member made their comments based on their particular circumstances. You should think about your own financial situation and needs and consider obtaining financial advice before making any financial or investment decision.

Any financial product advice provided will be under the Australian Financial Services Licence held by a third party and not by AustralianSuper Pty Ltd (AustralianSuper) and will be their responsibility. With the members' approval a fee may be charged if a Statement of Advice is produced.

Why combine your super?

Less may mean more when it comes to super accounts

Have you worked more than one job over the years? If your answer is yes, then chances are you have more than one super account. And you are not alone. The Australian Tax Office (ATO) estimates that 40% of the 14.8 million Australians who are with a super fund, have more than one super account.1

So why should I combine my super accounts?

Having multiple super accounts could eat away at your future retirement savings. The more accounts you have the more fees you pay and the less money you will have to invest. Each super account could be collecting around $532 a year in fees and charges.2 Let's say you had three super accounts, that's over $1000 in unnecessary super fees you are paying every year. But it's not hard to protect your savings.

What can I do now?

If you have more than one super account, consolidating your savings is simple and takes less than five minutes - even if you're not a member of AustralianSuper. Finding your accounts and rolling your super into one place won't just save you money, it will also assist you keep track of your retirement savings, helping you to feel in control.

Start saving more now:

Combine your super

Before making a decision to combine your super, you should ask your super provider about any fees or charges that may apply, or any other effect this transfer may have on your benefits, such as insurance.

1 https://www.ato.gov.au/about-ato/research-and-statistics/in-detail/super-statistics/Super-accounts-data/super-accounts-data-overview
2 https://www.ato.gov.au/Media-centre/Media-releases/Australians-losing-thousands-in-super-fees-annually--ATO/

'Like winning the lottery'

How Fiona found $45,000 in lost super.

Australians have nearly $18 billion in savings sitting in super accounts they have lost track of. Tracking down an old account could make a big difference to your retirement.

By any measure, Fiona Tannick-Jones has had a diverse career. Jobs working for Australia Post, completing studies in naturopathy and remedial massage, working in massage at a Broome Football Club and transitioning into an executive assistant role with the Western Australian government fill her CV. She endured change and uncertain economic circumstances while raising her daughters, now aged 22 and 19.

As a busy mother of two, retirement and super weren't high on Fiona's list of concerns. But when she heard that older and middle aged women are the highest growing proportion of homeless people during an education seminar run by AustralianSuper, she took notice. 'As you become older you become less employable. And your super has already been reduced because you've been out of the workforce for a period of time with children,' she explains.

After the session, Fiona completed a lost super search and found $45,000 from her time at Australia Post. 'I was a bit gobsmacked. I thought it might have been a clerical error. That's like winning the lottery,' she recalls.

Fiona urges other women to consider their financial future carefully. 'I tell everyone I come across to do a lost super search. Make sure that you're going to make a conscious effort to cover your expenses once work has gone for you,' she says.

Start planning with help from us:

Find lost super

Attend a seminar

The views expressed in this article are those of the member and not AustralianSuper. The member made their comments based on their particular circumstances. You should think about your own financial situation and needs and consider obtaining financial advice before making any financial or investment decision.

Any financial product advice provided will be under the Australian Financial Services Licence held by a third party and not by AustralianSuper Pty Ltd (AustralianSuper) and will be their responsibility. With the members' approval a fee may be charged if a Statement of Advice is produced.

https://www.ato.gov.au/About-ATO/Research-and-statistics/In-detail/Super-statistics/Super-accounts-data/Super-accounts-data-overview

Pre-tax contributions

Could salary sacrificing to your super be right for you?

No matter what point you're at in your working life, adding extra contributions to super can help increase the amount you retire with. You could also pay less tax on your income under a simple salary sacrifice plan.

Your super doesn't need to be a set and forget saving plan for your retirement. You can take more control of saving with flexible ways to make your own personal contributions.

So how does it work?

By law your employer has to contribute the equivalent of 9.5% of your salary to your super account each year. This is called a Superannuation Guarantee contribution and you see it on your pay slip.

But your employer's super contribution alone may not be enough to fund the retirement you've worked for. To increase your savings, you might consider making extra contributions to your super from your pre-tax salary. This is called a salary sacrifice to super arrangement.

The government limits how much you and your employer can contribute to your super from your pre-tax salary. This is called a concessional contributions cap and is currently $25,000 per year (FY17-18).

Salary sacrificing into super is initiated after an agreement between you and your employer. First, you decide how much extra you'd like to contribute to super - maybe a set amount each week, month or pay cycle. Then all you need to do is ask your employer to redirect that portion of your pre-tax salary into your super account and you may need to fill out a form to get it underway.

Follow those two steps, and you're on the way to boosting your savings for retirement.

Who benefits from salary sacrificing to super?

There are two advantages in making pre-tax contributions to super; paying a lower tax rate as well as adding to your savings. Making payments to super through a salary sacrifice plan is particularly beneficial if you earn between $37,000 and $250,000 a year. That's because any before-tax money you pay into your super is taxed at 15% whereas any money you take home will be taxed at your regular income tax rate, which could be as high as 47%.1

Put simply, use your super to pay less tax on your salary and retire with more. Take this example:

Jana's story

Jana earns $90,000 a year and wants to set up a salary sacrifice arrangement with her employer so she can add to her retirement savings before she finishes up with work. Jana creates a budget and decides she can afford to sacrifice $6000 a year to her super.

The benefit to Jana's super is immediate and will continue until her retirement. Her take-home pay will reduce by $3795, she will save $1305 in tax (on her income and super) and she will contribute an extra $5100 to her super.


The above information is provided to give you an idea of how a salary sacrifice arrangement might help you save on tax and boost your retirement savings. In order to provide these calculations, we had to make some assumptions which are listed below:

  • 2017/2018 marginal tax rates
  • Medicare Levy of 2%
  • Ignores admin fees and insurance premiums
  • Super Guarantee contributions of 9.5% remain the same both with and without the salary sacrifice arrangement

As with making any contributions to your super it is important to consider your personal finances and particularly your debt levels. Get started with some help from us:

Grow your super

1 Includes Medicare levy

Post-tax contributions

How little savings can make a big difference

Maybe you find yourself with a little extra in savings at the end of a month or you have been fortunate enough to receive a windfall or inheritance. You can pay that directly into your super account from your bank account. This is called an after-tax contribution and is another way to boost your super and retire with more.

So how does it work?

Making an extra contribution to your super is as easy as paying a telephone bill via BPAY. You can add up to $100,000 per year through the after-tax contribution method. But remember even small amounts can make a big difference over time.

Who can benefit from after-tax contributions?

Generally, anyone under 75 can make an after tax contribution to their super however you need to meet a work test if you are aged between 65 and 74.

Adding to your super via an after tax contribution can be especially good for people who earn less than $51,021 per year (including assessable income, fringe benefits and super contributions).

If you earn less than $51,021 and add to your super from your after-tax salary (for example through a BPAY payment), the government also makes a contribution of up to $500 a year directly into your super account. The amount you receive depends on your income and how much you contributed. All you have to do is lodge your tax return and the ATO will work out if you are eligible and pay the co-contribution directly into your super account.

As with making any contributions to your super it is important to consider your personal finances and particularly your debt levels.

Get started with some help from us:

Add to your super

Co-contribution information

Speak to someone



Retirement doesn't mean your super balance needs to stop working too

You've worked hard and saved hard. Now it's time to live the retirement you have always wanted. But first a quick pause. You have reached what is called the 'preservation age'. This is the age when you can access your super.1 Now you have some important decisions to make.

If you wanted to access your super, you might choose to:

  • Withdraw all your super and manage it yourself from your regular bank account
  • Open a retirement income account to receive payments from your super, similar to a pay packet from work

At AustralianSuper we want to take the uncertainty out of retirement.

Take a look at this example of what you could do with a super balance of $75,000:

Sunil is 65 and has a super balance of $75,000. Sunil decides he would like to access his super so withdraws his balance and puts it into his bank account. He is very careful and only withdraws $140 per fortnight to top up his Age Pension.

Pia is 65 and has a balance of $75,000. Pia decides she would like to access her super but doesn't want the responsibility of looking after such a large sum of money. She decides to transfer her super to a retirement income account and receives fortnight payments of $140 to top up her Age Pension entitlement.

This is what happens to Sunil and Pia's super balances over time:

As you can see, despite the fortnightly payments being the same, Sunil's balance runs out 5 years before Pia's.

The above comparison is provided to give you an idea of how your super can be accessed in retirement. To make these calculations, we had to make some assumptions. These are listed for you below:

  • Choice Income returns are 5.5% p.a.
  • Bank interest is 3.5% p.a. (a mixture of term deposits and cash)
  • The income increases each year in line with inflation of 3.5%
  • No fees from the regular bank account
  • Fees of $78 p.a. plus 0.11% of the member balance have been included for the retirement income account

An AustralianSuper Choice income account can help you pay less tax on your retirement savings, leaving you with more to spend in retirement.

Find out how you can access your super:

Learn more


1 To withdraw your super you must meet a condition of release.



Retirement doesn't mean your super balance needs to stop working too

You've worked hard and saved hard. Now it's time to live the retirement you have always wanted. But first a quick pause. You have reached what is called the 'preservation age'. This is the age when you can access your super1. Now you have some important decisions to make.

If you wanted to access your super, you might choose to:

  • Withdraw all your super and manage it yourself from your regular bank account
  • Open a retirement income account to receive payments from your super, similar to a pay packet from work

At AustralianSuper we want to take the uncertainty out of retirement.

Take a look at this example of what you could do with a super balance of $300,000:

Kate is 65 and has a balance of $300,000. Kate decides she would like to withdraw all her super and manage it from her bank account. She is very careful and only withdraws $570 per fortnight to top up her Age Pension entitlement.

Mario is 65 and has a balance of $300,000. Mario decides he would like to access his super but doesn't want the responsibility of looking after such a large sum of money. He decides to transfer his super to a retirement income account and receives fortnightly payments of $570 to top up his Age Pension.

This is what happens to Kate and Mario's super balances over time:

As you can see, despite the fortnightly payments being the same, Kate's balance runs out 5 years before Mario's.

The above comparison is provided to give you an idea of how your super can be accessed in retirement. To make these calculations, we had to make some assumptions. These are listed for you below:

  • Choice Income returns are 5.5% p.a.
  • Bank interest is 3.5% p.a. (a mixture of term deposits and cash)
  • The income increases each year in line with inflation of 3.5%
  • No fees from the regular bank account
  • Fees of $78 p.a. plus 0.11% of the member balance have been included for the retirement income account

An AustralianSuper Choice income account can help you pay less tax on your retirement savings, leaving you with more to spend in retirement.

Find out how you can access your super:

Learn more


1 To withdraw your super you must meet a condition of release under super law.



Over 60

How is my super taxed in a Choice Income account?

Let's say you've turned 60 and decided to put your savings into a Choice Income account. Here's how AustralianSuper can help you pay less tax on the savings you've made and help your retirement dollar go further.

After 60, the money you receive from your super is generally tax free and does not need to be declared as income to be assessed for tax when you lodge a tax return.

But the tax you pay on the money made in investments from your Choice Income account varies based on whether you are completely retired or using what is called a transition to retirement strategy. Under a transition strategy you can keep working, while at the same time drawdown on some of your super savings and save on tax.

If you are fully retired1 you pay zero tax on investment earnings in your Choice Income account. However, the tax situation is different if you are in a transition to retirement arrangement. In this case, the money you make on investments on your Choice Income account has the same 15% tax rate that applies to your super.

Find out how you can access your super:

Learn more


1 Fully retired means you've met a full condition of release under super law.



Under 60

How is my super taxed in a Choice Income account?

So you're thinking of accessing some of your super before you turn 60. Here's how it works. Before you turn 60, your super balance is split into a tax-free amount and a taxable amount. The tax-free part is made up of any after-tax contributions you made to your super while working towards your retirement. The rest of your balance is taxable.

If you want to access your super before you turn 60 through a retirement income account such as Choice Income, then no tax is payable on the tax-free component. But the taxable component will be added to your taxable income and it will be taxed at your marginal tax rate. However, this tax could be reduced as a result of receiving a tax offset.

The tax you pay on the money made on investments from your Choice Income account varies based on whether you are completely retired or using what is called a transition to retirement strategy. Under a transition strategy you can keep working, while at the same time drawdown on some of your super savings and save on tax.

If you are fully retired1 you pay zero tax on investment earnings in your Choice Income account. However, the tax situation is different if you are in a transition to retirement arrangement. In this case, the money you make on investments on your Choice Income account has the same 15% tax rate that applies to your super.

Find out how you can access your super:

Learn more


1 Fully retired means you've met a full condition of release under super law.