Week 8 - Retirement Planning

Question 1

What are the conditions of superannuation release

Answer 1

1. Reaching preservation wage and retiring
2. Reaching preservation wage and beginning retirement transition
3. Ceasing employment on or after 60
4. reaching 65
5. Compassionate grounds

Question 2

What are the issues of retirement planning ?

Answer 2

1. increasing cost of age care
2. Tax minimization
3. Longevity of super
4. Age pension entitlement

Question 3

What are the three types of superannuation benefits

Answer 3

1. Preserved benefits
2. restricted non-preserved benefits
3. unrestricted non-preserved benefits

Question 4

describe preserved benefits

Answer 4

Any personal superannuation contributions and gains

Available once a condition of realise are met

Question 5

Describe restricted non-reserved Preserved benefits

Answer 5

Any employment-related contributions other than compulsory employer contributions

Available after a condition of release met

Question 6

Describe unrestricted non-reserved benefits

Answer 6

Any benefits after a condition of release has been met

Question 7

What are the three taxable components of a superannuation withdrawal

Answer 7

1. Taxed element
   - 15% contribution tax already paid
2. Untaxed element
   - no tax has been paid
3. Tax free element
   - no taxed is owed

Question 8

What are the factors determining tax paid on superannuation withdrawals

Answer 8

1. preservation age
2. Age when receiving the payment
3. If tax has already been paid
4. If withdrawal is lump sum or income stream

Question 9

What is the low-rate cap?

Answer 9

230,000 maximum lifetime cap on the taxable component that can be taxed at the concessional rate

Question 10

What are the two main retirement income screens

Answer 10

1. Pensions (account-based)
2. Annuities (non-account based)

Question 11

What are the two types of pensions?

Answer 11

1. account based pension
2. Market linked pension

Question 12

What are the two types of annuities?

Answer 12

1. lifetime income stream
2. Fixed-term income stream

Question 13

What are the main advantages of annuities over pensions?

Answer 13

1. protect against longevity risk
2. Protects against inflation risk

Question 14

What is the main advantage of pensions over annuities?

Answer 14

1. flexibility of income
2. residual balance passed on to bequests

Question 15

What is a mean-variance efficient strategy?

What are its benefits?

Answer 15

two-part retirement plan

part 1: income stream
part 2: investment component

provides protection from inflation and longevity risk

Question 16

What factors should be considered when making a retirement plan?

Answer 16

1. Risk tolerance
2. Life expectancy
3. Health
4. Goals
5. estate planning
6. returns
   7 regulations

Question 17

What are the three main types of transition-to-retirement (TTR) strategies?

Answer 17

1. accessing extra income before full retirement
2. Reducing working hours but maintaining income
3. Boosting super contributions and drawing income

Question 18

What are the conditions of TTR strategies?

Answer 18

1. reached preservation age
2. Draw downs between 2% and 10%
3. Pension is non-commutable

Question 19

What are two other TTR strategies

Answer 19

1. downsizing
2. Reversing mortgage