When is the best time to retire?
Choosing the right time to retire can have a significant effect on your retirement wealth.
If the timing of your retirement is your choice, and is not due to a forced redundancy or illness, choosing the right time of the financial year to retire can leave you with more money to enjoy…
Choosing the right time of the financial year has an effect on your finances for two main reasons:
1. Annual salary reviews
If you receive a salary review in the early part of the
financial year, it may be worthwhile retiring after this
has occurred.
This is because if you are a member of a defined benefit fund, your lifetime super is normally based on your current income level, or an average of the previous 3 years.
2. Taxation consequences
From a tax perspective, it is beneficial to retire in the
earlier part of the financial year.
This is because you will be receiving any unused holiday pay in a year when your taxable income will usually be much less due to full or semi-retirement.
In addition, any increase in personal tax rate thresholds may result in further tax savings.
Many retirees tend to retire at the end of a financial year. However, from a tax perspective, it is beneficial to retire at the start of a financial year ie, July rather than June.
| Income: | |
| Full-year salary | $67,000 |
| Holiday Pay | $12,000 |
| Total income | $79,000 |
| Tax payable on
income (including Medicare) |
|
| Income: | Income: | ||
| Full-year salary | $67,000 | Full-year salary | |
| Holiday pay | $Nil | Holiday pay | |
| Total income | $67,000 | Total income | |
| Tax payable on income* | $15,705 | Tax payable on income* | |
Income tax saved = $3,819 - This is because you are now in a lower tax bracket, due to receiving a lower level of annual income.
When planning to retire, planning the right time can make an important difference – seek professional advice from your Count adviser to ensure you make the right decision.
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As at
27 June, 2007 Doc Owner: < > |
