Your 50s can be an exciting decade, from paying off your mortgage to perhaps having grandchildren. However, now’s the time to make sure your halal super is on track for your retirement.
Whether you need to start saving more or you’re already on track, you should know. Then, you won’t have to worry about your life after work.
Read on to learn how to maximize your retirement savings.
1. Analyse Your Retirement Savings
When you reach your 50s, you probably have a better idea of when you plan to retire. You might also know what kind of lifestyle and income you’ll need after you leave the workforce.
Both pieces of information can help you make sure you’re on track for retirment. If you’re not on track, you’ll know that you need to adjust your contributions to your superannuation fund.
Many Australians feel they aren’t saving enough, so looking at your savings is crucial. After you consider your current situation, you can adjust your savings plan for the next decade.
Factors such as homeownership or leaving the workforce to care for children can affect one’s savings. As you analyse your savings, consider how much you need to increase your contributions to meet your retirement goals.
Then, you’ll be able to save enough money to retire comfortably when you want. Keep reviewing your finances every year or so to ensure that you stay on track.
2. Understand the Access Rules
Anyone 65 or older can use the money from their super, and it doesn’t matter if they’ve retired or not. That way, you can continue to work if you want to.
Australia also has a transition to retirement (TTR) program so that you can slowly move from working full retirement. As long as you follow the rules of the transition, you can withdraw funds from your halal super.
The third instance where you’re able to take money out is if you retire and have met your preservation age. This number depends on when you were born:
- 55: born before 1 July 1960
- 56: born between 1 July 1960 and 30 June 1961
- 57: born between 1 July 1961 and 30 June 1962
- 58: born between 1 July 1962 and 30 June 1963
- 59: born between 1 July 1962 and 30 June 1964
- 60: born on 1 July 1964 or after
If you fit at least one of those requirements, consider whether you want to start withdrawing now or wait. Then, you can make sure you’ll have enough savings to support yourself.
3. Review Your Timeline
Knowing when the government allows you to access your retirement savings means you should review your retirement plan. Consider when you want to leave the workforce and how.
Your plan can help you get a better idea of how much money you’ll need to stop working. If your plans have changed significantly since you started your super, you might need to adjust your contributions.
Take a look at your investment options and consider if you can increase your returns with a different investment. You might also think about taking on a small income stream outside of work.
Then, you can still maintain your current lifestyle while increasing your retirement savings. If you can, lowering your monthly costs is another simple way to save more for retirement.
4. Adjust Your Beneficiaries and Insurance Coverage
Having insurance coverage for your super becomes more important as you get older. Make sure you have the right coverage for your current situation.
For example, you may need to increase your coverage if you have a family. You might also need to make changes if you’ve gotten married or divorced recently.
Consider who your beneficiaries are for your super insurance. That way, you’ll give access to someone you trust. If you’ve divorced, you may want to remove your ex-spouse as a beneficiary.
Or you might choose to add a new spouse or your children as beneficiaries. Then, they’ll be okay if you get sick or pass away, so they can withdraw the money.
5. Compare How You Can Receive Your Super
As you get closer to withdrawing from your super, you need to consider how you want to receive the money. The two options include a lump sum and a regular income stream.
If you take the transition to retirement route, you’ll receive consistent, regular payments. That way, your income won’t decrease as your working hours decrease, and you’ll always have money coming in.
However, taking a lump sum or separating the fund into a few lump sums can also be useful. If you want to invest in a new property or make another big purchase, you might need a lump sum.
Taking a lump sum also offers you more control over when you use the money. You won’t have to wait for monthly payments, but you’ll also need to know how to manage your funds.
6. Talk to a Financial Advisor
Consulting with a financial advisor is an excellent way to make sure you make the most of your halal super. An advisor can recommend how you increase your retirement savings to help reach your goals.
You’ll be able to ask questions and get specific advice based on your situation. And your advisor may help you find the right investment options to increase your savings without compromising on your beliefs.
While you can analyse and research your options alone, an advisor has more experience. They might know of certain options or strategies that could be suitable for you.
As you get older, retirement investing comes more important, especially if you’re behind on saving. The right financial advisor can help you get back on track.
7. Contribute Tax-Deductible Funds
As you continue to work full-time, your income might be the highest it has been throughout your career. Not only does this mean you can afford to pay more into your retirement, but doing so can help you save money on taxes.
Consider making a tax-deductible contribution up to the maximum of $27,500 each year. You’ll still need to pay tax on the money you contribute.
However, you can reduce the money you put into your super from your total taxable income. In most cases, you can still save a bit of money overall by putting more into your superannuation fund.
As long as you don’t need the money for daily expenses, saving for retirement is great. Then, you won’t have to pay as much when taxes are due.
8. Think About the Transition
Another thing to consider is if you want to use the transition to retirement (TTR) strategy. This strategy lets you either work less and maintain your income or save more for retirement.
As you move from full-time to part-time, you can take out enough money so that you receive the same amount of money as before. But you’ll still be able to contribute to the fund from your employment income.
You can also move some of your super to a TTR pention and do a salary sacrifice. That means you can use more of your money before taxes to reduce your taxable income.
The strategy can be complex, especially if you choose to keep working full-time and save on taxes. However, it can be worth it if you can’t work full-time but want to top off your super.
9. Consider a Small Business Contribution
If you have a small business, think about if you plan to sell it before you retire. When you do that, you can get an exemption on your capital gains tax (CGT).
Over your life, you can write off up to $500,000. Your business needs to also meet requirements, such as not having more than $2 million worth of aggregate turnover each year.
As long as you meet these requirements, you can pay some of your business earnings into your halal super. Then, you won’t have to pay as much in taxes when you sell the business.
Instead, you can find the best next owner to sell to, and you can make sure the business will be in good hands. The taxation won’t be as big of a concern.
10. Make an After-Tax Contribution
While it can be nice to contribute money to your super to lower your taxes, you can also save after taxes. If you have a lot of extra money, you can add it to your super, as long as you don’t exceed the yearly cap.
The cap is $100,000 for 2020-2021, and it can change each year. Still, you can use the bring-forward rules to contribute extra money to help save for retirement in your last few years of work.
If you’re significantly behind on saving but have extra income, this is a fantastic option. It’s also useful if you have a small amount of income or if you’re on track and want to ensure you’ll be comfortable in retirement.
How Will You Top Off Your Halal Super?
As you get older, your super savings should grow enough to provide you will a comfortable living after you retire. Fortunately, you can do a few things to make sure your halal super will have the balance you need.
Then, you won’t have to worry about working longer than you want. And you won’t need to reduce your expenses to keep from running out of money quickly.
Do you want to start a halal super? Join us so that you can save for retirement.
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Ethical Finance and Innovation
Dr. Sayd Farook is the Executive Director of Crescent Foundation. He is Group Chief Operating Officer of Crescent Wealth and Managing Director of Crescent Finance. He previously served as Advisor to the Executive Office of the Vice President and Prime Minister of the UAE and Ruler of Dubai. In this capacity, he envisioned and executed strategic / transformation initiatives for Dubai and the UAE. Prior to that, he was the Global Head Islamic Capital Markets at Thomson Reuters, where he advised and served large corporates, multilaterals and governments in the Middle East, North Africa and South East Asia.