Strategies for retirement

Susan Hely passes on some tactics for a ‘triple play’

Susan Hely

GEORGE FETTING

NAME: Imelda Cooney

STATUS: 56, married with a daughter, 18

QUESTION: Should I set up a transition to retirement account-based pension or keep salary sacrificing? Pay down the mortgage or boost my super with extra payments?

SOLUTION: Pay off your mortgage but – with 10 years to retirement – go flat out to boost your super with salary sacrifice. A transition to retirement account-based pension may save you tax.

Imelda Cooney is typical of many Australian women when it comes to superannuation. She has taken time out of the workforce to be a mother and worked from home for many years. As a result, her super balance is low.

Australian women hold 37% of total super balances, compared with 63% for men, according to the Association of Superannuation Funds of Australia. ASFA says a couple needs a super lump sum of $510,000 and a single person $430,000 to fund a comfortable retirement.

But now with a full-time job that pays a good rate of super above the standard 9%, Imelda is racing to boost her savings. She has been salary sacrificing an extra $1000 a month and her balance has reached $103,000. She plans to work until 65 and is looking at strategies to rev up her super. Imelda has reached the age to access her superannuation savings (currently 55 for those born before July 1, 1960).

A strategy to help pump up Imelda’s super is a transition to retirement (TR) account-based pension. She admits her No. 1 priority is paying off the mortgage on her family home as it is non-deductible debt. Is she better off salary sacrificing or paying off her mortgage?

Two years ago Imelda and husband Stephen went to a financial planner. They paid $2000 for a plan that included advice to move from low-cost public sector and industry funds with fees averaging 0.7% a year to the Asgard eWRAP super with fees of around 3%, including the planner’s fee. The planner recommended 85% of their super money be invested in high-growth assets. But it was the planner’s disclosed annual fee of $3300 that really put Imelda off and she left the super where it was.

She would like to help her 18-year-old daughter Lottie set herself up financially.

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