Retirement is a time we all look forward to - a time when we can do many of the things we have only dreamt about during our working life.
The trouble is, dreams of travel, hobbies or just relaxing with friends and family call for something many retirees have too little of - cash. And unless we make some long term plans while we are in the workforce, many of us could be left financially ill-prepared for our senior years.
Finding yourself shortchanged in later life could mean working for longer than you wish to. At worst it could mean shelving many of those life-long retirement dreams.
Ours is an ageing population and as growing numbers of Australians head towards their senior years, governments are increasingly encouraging us to save for our own retirement.
In addition to greater lifestyle aspirations, we can also expect to live longer than retirees of previous generations. Taken together, it means we need a decent nest egg to fund even a modest retirement.
While it is possible to develop a portfolio of independent investments to provide a source of income during retirement, the single most tax-friendly environment for retirement savings is a superannuation fund.
Superannuation is an investment that is designed specifically to fund our retirement. Our super balance is built up during the course of our working lives from contributions made by our employers, and hopefully, topped up by additional contributions made out of our own pocket - and in some cases through government co-contributions.
In most super funds, our money is invested in a wide range of assets, and the ongoing returns together with capital growth on these investments, accumulates until we access the fund at preservation age or on retirement.
One of the key pluses of super is that it is concessionally taxed - both while the money is accumulating and again when we access our super once we've finished working.
Withdrawals from super are tax-free after age 60. It means more of your money can go towards a better post-work lifestyle. This makes super an ideal choice for retirement savings.
When retirement finally rolls around, it is possible to access your super savings in one of three ways:
Taking a lump sum of cash
Purchasing a private income stream, or
A combination of the two.
An income stream (or 'private pension') is simply a way of tapping into your super gradually. Your capital is invested so that it continues to earn tax-friendly returns - however you receive regular payments - a bit like the wage or salary of your working days - that comprise a return of your capital plus income earned on your invested funds.
For many retirees, an income stream is a low-maintenance way to receive a regular retirement income with none of the worries associated with independently invested assets. The regular income also makes budgeting far easier.
Alternatively, you can browse through our frequently asked questions or Online Service Desk, email us or call us on 1300 552 070 to speak to a Citibank Relationship Manager (if not in Australia call +61 2 8225 0010).
