Key takeaways

  • It’s important to determine the total amount of income you’ll need to live off based on what your living costs are

  • Create a financial plan. You want to be sure you’re investing in the right mix of assets and taking on enough risk to achieve your retirement goals. A financial adviser can help with this

  • To reduce your taxable income, consider adding a little extra into super. 

Like most people, you’re probably questioning if you’re making the most of your financial situation to set yourself up for a good retirement. You may even be considering your options to retire early.

In this article we address what’s involved in retirement planning for high-income earners, including how you can secure your income to last the distance and do so tax efficiently.


Step 1: Understand your living costs

It’s hard to predict what your expenses will be later in life, but knowing what your lifestyle costs are now, is essential to planning for retirement.

Put simply, what you’re going to spend, drives how much you’ll need saved so you don’t run out of money.

You’ll also need to factor in the amount of sustainable income you can create from your savings, investments and other retirement income sources. Our retirement calculators can help you with this.

Step 2: Calculate your total retirement savings goal

It’s important to determine the total amount of income you’ll need to live off based on what your living costs are.

You’ll then need to decide how much you can withdraw from your super, other savings and investment earnings over your retirement timeframe.

This part may be difficult to calculate on your own, especially when there are a number of variables to consider, like different savings patterns, investment strategies, and rates of return. There are retirement calculators available to help you or you could speak with us on 1300 765 811.

Step 3: Make a financial plan

A financial plan is designed to turn whatever vision you have for your retirement into reality.

A large part of developing a financial plan is about reviewing your investment portfolio. You want to be sure you’re investing in the right mix of assets and taking on enough risk to achieve your retirement goals.

This is where an experienced financial adviser can really add value. They can also help you streamline your potential sources of income and identify strategies to help reduce your taxable income.

Other things to consider for retirement planning

Strategies to reduce tax

Adding more into super
A possible option for high-income earners to reduce their taxable income is to add a little extra into super.

When you sacrifice some of your salary into super, or claim a deduction for personal contributions, those contributions are taxed at a rate of just 15%–a lot lower than the tax you’d be paying on your regular income. These, as well as employer contributions, are known a concessional contributions.

There is a limit to how much you can contribute as concessional contributions each year though–currently $27,500. Not only that, if your income from certain sources exceeds $250,000 per year, you may be charged an extra 15% tax on these contributions. So, you may want to consider speaking to a financial adviser to determine if this is a good option.

You may also want to consider contributing after tax dollars into super, where earnings are taxed at a maximum rate of 15%. This is likely to be lower than your personal tax rate of up to 47%. These are called non-concessional contributions and there is currently an annual limit of $110,000, or $330,000 if you can bring forward the next two years’ contributions.

Retirement income and tax

Depending on how you withdraw your super and at what age, there will be different tax implications worth investigating.

Account based pension
In most cases,  if you’re 60 or over and choose to withdraw your super as a pension–in the form of a retirement income stream–both the investment earnings and the pension payments will be tax-free.

However,  there is a lifetime limit on the total amount of super that can be transferred into a pension and it is currently $1.7 million. You may have a lower limit if you have already commenced a super pension.

If you’re under 60, a portion of your pension payments will be taxed at your marginal tax rate. A 15% tax offset will generally be available to lower any tax that may be payable.

Transition to retirement pension
A transition to retirement (TTR) pension enables you to access your super while you’re still working, once you’ve reached preservation age.

When you reach 60, your pension payments are tax-free. However, under 60, your pension payments are taxed at your marginal tax rate, but you will receive a 15% tax offset.

Investment earnings from within TTR pension are taxed at a maximum rate of 15%.

Lump sum
You may be able to withdraw your super as a lump sum payment when you retire. Generally, you can access this money without paying tax if you’re over 60.

Where to go to for more information and advice

Looking for more information now? We recommend you visit the retirement section on our website, which includes a range of tools and resources to help kick-start your retirement planning or call us on 1300 765 811.

Source: MLC

Important information and disclaimer

This article has been prepared by NULIS Nominees (Australia) Limited ABN 80 008 515 633 AFSL 236465 (NULIS) as trustee of the MLC Super Fund ABN 70 732 426 024. NULIS is part of the group of companies comprising Insignia Financial Ltd ABN 49 100 103 722 and its related bodies corporate (‘Insignia Financial Group’). The information in this article is current as at February 2022 and may be subject to change. This information may constitute general advice. The information in this article is general in nature and does not take into account your personal objectives, financial situation or needs. You should consider obtaining independent advice before making any financial decisions based on this information. You should not rely on this article to determine your personal tax obligations. Please consult a registered tax agent for this purpose. Opinions constitute our judgement at the time of issue. The case study examples (if any) provided in this article have been included for illustrative purposes only and should not be relied upon for decision making. Subject to terms implied by law and which cannot be excluded, neither NULIS nor any member of the Insignia Financial Group accept responsibility for any loss or liability incurred by you in respect of any error, omission or misrepresentation in the information in this communication.