How much do you need to retire comfortably?

BMT team — Wed, 05 Jun 2019 02:36:37 +0000

Do you see yourself driving a reasonable car, wearing nice clothes, drinking wine and holidaying at least once a year when you retire? If the answer is yes, then you’re envisioning what’s known as a ‘comfortable retirement’. According to the Retirement Standard Report released by the Association of Super Funds of Australia, a comfortable retirement enables an older, healthy retiree to be involved in a range of leisure activities and to have a good standard of living through the purchase of items like household goods and private health insurance. A comfortable retiree is also someone who owns their own home outright. So how much do you need to retire comfortably? Contents: Comfortable retirement Ensure you retire comfortably Boost your cash flow Comfortable retirement The Retirement Standard Report outlines budgets for modest and comfortable lifestyles for two separate age groups – retirees aged around 65 and retirees aged around 85. It also breaks the budgets down into singles and couples. If you’re a single retiree aged around 65, you’ll need $43,255 per year to retire comfortably or $27,646 to live modestly. If you’re aged around 85, you’ll need $41,245 per year to have a comfortable retirement or $26,186 to live modestly. Couples looking to live comfortably in retirement will need $61,061 per year if aged around 65 or $57,088 if aged around 85. To live modestly, the budgets drop to $39,848 and $37,403 respectively. Ensure you retire comfortably There are several ways to secure a comfortable retirement. It’s important to first set realistic retirement goals and carefully plan how much money you are likely to spend each year. Assess your current savings and consider how you can save more for your retirement. Depreciation deductions can help property investors get closer to securing a comfortable retirement. Property depreciation is generally the second biggest tax deduction after interest, though it’s often missed by investors. This is because it’s a non-cash deduction, meaning you don’t have to spend money to be eligible to claim it. Any property which generates income may be eligible for thousands of dollars in depreciation deductions. Depreciation deductions fall into two categories: Capital works deductions (division 43) Plant and equipment depreciation (division 40) Capital works refers to the deductions available for the building’s structure and items considered to be permanently fixed to the property such as kitchen cupboards, doors and sinks. Residential homes in which construction commenced after 15th September 1987 and commercial properties in which construction commenced after 20th July 1982 are eligible for the capital works deductions. Plant and equipment assets refer to items which are easily removable from the property such as carpet, blinds and hot water systems. These items have a limited effective life as set by the Australian Taxation Office and can generally be depreciated over time. It’s important to be aware of restrictions to claiming depreciation on previously used plant and equipment found in second-hand residential properties. Read our BMT Insider article on plant and equipment deductions and legislation for more. By claiming depreciation, investors can reduce their taxable income and improve the costs of holding a property. The additional savings depreciation deductions provide can help investors to pay off their loan faster, pay for expenses such as regular repairs and maintenance or even help them to save to complete renovations or build their existing investment portfolio. Each of these scenarios can help an investor to improve their chances of achieving a comfortable retirement. Boost your cash flow A BMT Tax Depreciation Schedule ensures property investors don’t miss out on the hidden cash flow available for their properties. BMT found residential property investors an average depreciation claim of almost $9,000 in FY 2017/18. Reducing your taxable income by this amount in the first year alone will boost your cashflow, meaning you can save more for your retirement. Request a Quote today for a free estimate of your likely deductions or contact one of our expert staff on 1300 728 726.

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Considerations when investing in property for retirement

BMT team — Fri, 01 Feb 2019 03:21:05 +0000

Property investors often ask whether it’s a sound financial move to sell their investment property before or after retirement. There are a number of factors which can make the decision more complicated, such as lifestyle issues and financial realities. Thinking ahead and speaking with a Financial Adviser can help you make the most of any opportunities and avoid unexpected financial implications, such as tax obligations and loss of age pension entitlements. Here are some important things to be aware of when investing in property for retirement. Capital Gains Tax (CGT) It is important to be aware that you will pay CGT if you sell an investment property. If you’ve owned the property for at least twelve months, a 50 per cent CGT discount will apply to the profit. However, if you’ve owned the property for less than twelve months, CGT will apply to 100 per cent of the profit. Make sure you read up on all the CGT exemptions and seek advice from an Accountant or your Financial Adviser on how selling the property will affect your individual circumstances. Pension income and assets tests (Centrelink) Pensions have income and asset limits. If you’re over these limits, you get a lower pension. If you are selling an investment property, it’s important to note that the money released from the sale will be assessed under the income and age pension assets tests. Centrelink will look at the type (in this instance an investment property) and value of assets you own in and outside of Australia. The value of your assets is what you’d get if you sold them at market value. Centrelink will deduct any debt secured against the asset from its market value. For example: Peter owns an investment property with a market value of $300,000 and a mortgage on it of $100,000. Centrelink would assess the value of their property as $200,000. If you would like to acquire further information about the income or age pension assets tests, visit Department of Human Services. Superannuation Selling an investment property and adding the proceeds to your super balance isn’t as straightforward as it would seem. It is important to be aware that the rules about adding additional super contributions tighten after the age of sixty five. If you are under sixty five years of age, the maximum after-tax contribution to super is capped in any one financial year at $100,000. However, the ‘bring-forward rule’ allows you to contribute up to three years’ worth of after-tax (non-concessional contributions) in one year. This means you can contribute $300,000 in one year as long as your total super balance isn’t above $1.5 million and you complete the three-year bring-forward period before you turn sixty five. After the age of sixty five, it becomes somewhat more difficult to inject large sums into your super. The annual after-tax cap of $100,000 remains in place, but the ‘bring-forward rule’ is no longer available. Instead, you must satisfy a work test to make any additional super contribution. To pass the work test, you must work at least forty hours over a single thirty-day period within the financial year that you’re making contributions to your super. Understanding the interplay between property, super and the age pension are vital to ensuring you get the best result from your investment, which makes speaking to a Financial Advisor particularly important.

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How much do you need to retire comfortably?

Considerations when investing in property for retirement