Retiring in Style: Maximising Super with a Downsize
Helen is 63 and Ethan is 61, and they’re eager to embrace a fully retired life within the next year.
With a combined income of $200,000 ($110,000 for Helen and $90,000 for Ethan) and a marginal tax rate of 32% (including the Medicare levy), they’ve been diligent savers.
Their home, valued at $2,000,000, has been their haven for the past 13 years. Helen’s super balance sits at $600,000, while Ethan’s is at $400,000.
The Great Downsize
Dreaming of a more secure and low-maintenance lifestyle, Helen and Ethan decided it was time to downsize from their family home to a comfortable apartment.
Their property sold for $2,115,000, leaving them with net sale proceeds of $1,000,000 after expenses.
Retirement Planning Boost
The downsizing presented a golden opportunity to supercharge their retirement savings.
By taking advantage of the downsizer contribution rules, Helen and Ethan could contribute a combined $600,000 ($300,000 each) to their superannuation accounts.
To make the most of the remaining $400,000, they considered the bring-forward rule, which allows for larger, one-off contributions. However, with a desire for more balanced super balances, they opted for a different strategy.
Helen contributed $100,000 to her super, while Ethan contributed $300,000 to his.
This approach enabled them to maximise their super contributions while aiming for a more equitable distribution of their retirement savings.
A Brighter Financial Future
By strategically utilising the downsizing proceeds, Helen and Ethan have significantly boosted their superannuation balances.
This strategic move positions them to enjoy a comfortable and financially secure retirement, free from the burden of tax on their earnings.
Understanding the Downsizer Contribution
The downsizer contribution is a government initiative designed to encourage older Australians to downsize their homes and invest the proceeds into superannuation, to gain financial freedom.
To be eligible, you must be at least 60 years old, own the property for at least 10 years, and contribute the proceeds to your super within the financial year of the sale or the following financial year.
Maximising Your Super
Helen and Ethan’s story highlights the potential benefits of careful retirement planning.
By combining the downsizer contribution with other strategies, such as the bring-forward rule, you can significantly increase your super balance and improve your financial position in retirement.
It’s important to note that superannuation rules and regulations can be complex, and it’s essential to seek professional advice tailored to your individual circumstances.
A fiduciary financial advisor can help you understand your options and develop a retirement plan that aligns with your goals.
Key Takeaways
Downsizing can be a strategic move to boost retirement savings.
Understanding and utilising government incentives like the downsizer contribution can maximise your super balance.
Aiming for a balanced superannuation portfolio can provide long-term financial security.
Seeking professional financial advice is essential for making informed decisions about your retirement.
By carefully considering your options and taking advantage of available strategies, you can increase your chances of achieving a comfortable and fulfilling retirement.
Disclaimer: This blog post is intended for general information purposes only and does not constitute financial advice. It’s essential to seek professional advice tailored to your specific circumstances.
Alternatively, if you'd prefer a personal touch, book a free 15-minute consultation here to discuss your specific situation and explore how to optimise your retirement plan.
Find out more about how we can help: https://www.providencegroup.com.au/retirement-planning-services
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