Mr Taxman
Change the way you feel about taxes.
Get informed and discover what the taxman doesn't want you to know.
Sharing it with Australia, Mr Taxman is a regular Woman’s Day columist and TV finance commentator
  • click to visit Mr Taxman on Twitter
  • click to visit Mr Taxman on FaceBook
  • rss

5 steps to an early retirement

Feb 07, 2011

Step 1: Save more

Save more money in superannuation and start saving aggressively outside of super. Use non-super investments to fund your lifestyle before you are allowed to draw on superannuation savings. If your super can be paid out at age 60 but you want to retire at 50, aim to save enough in non-super investments to support your lifestyle for 10 years. After that, use your superannuation. Why? Because you pay less tax on superannuation and this means your capital will grow more quickly within super.

Step 2: Invest aggressively

An aggressive super strategy will free up cash for non-super investments. Many super funds now offer high-growth investment options that tend to produce better long-term returns than conservative investments, albeit with a higher degree of volatility. Outside of super, invest in growth assets like property and shares that produce higher historical returns than cash or fixed interest. Remember that you need to hold growth assets for around 10 years or more to benefit from the long-term returns these assets can generate. Be prepared to accept the risks associated with high-growth investment strategies. The balance of these investments is likely to fluctuate - both up and down.

Step 3: Plan income streams

Work out how you want to receive income in retirement. Allocated pensions reduce tax liabilities, for example. Early retirees can’t receive allocated pensions but an investment portfolio including fully-franked Australian shares and property trusts will help minimise tax.

Step 4: Calculate income needs

Calculate how much annual income you will need in retirement to set a final savings target. Be realistic – you may not need to match your pre-retirement income once you quit work. This is most likely to apply if you have paid off debts and have no dependants.

Step 5: Talk to an adviser

Use a financial adviser to design a savings strategy that suits your individual circumstances and risk profile.

Tags: Retirement

Author: Mr Taxman

Comments

Post a New Comment

Media Availability

Are you interested in booking Mr Taxman for a speaking engagement or requesting his viewpoints for an article?

comments-rhsLatest Comments

  • "Hi. I came to Australia as a de-facto spouse. I have recently taken out a couples private health insurance policy for my partner and I and a reciprocal health care plan ontop for my partner only..."

    By: Lucy Howe at Aug 20, 2017 7:20AM

    Post: Marriage

  • "Hi Mr Taxman, I am married to my wife for 3 years now and it is the first time for us to lodge tax return in AU as we moved here in June 2016. I opened a personal bank account and deposited some..."

    By: Jure at Aug 16, 2017 5:39AM

    Post: Marriage

  • "hi, i run a small business that is yet to turn a profit as my start up expenses were high. Is it possible to offset these losses against my husband income?"

    By: heidi at Aug 15, 2017 11:19PM

    Post: Marriage

  • "Hi, not sure if this is travel or vehicle expenses..... Home is in town A - employer is located in town A (but I rarely work there). Get seconded for 12 months to town B (120km away) and other..."

    By: Jason at Aug 04, 2017 4:04AM

    Post: Claiming car expenses

  • "I've paid my outstanding HECS debt so my balance is now $0. My question is......Is it a good idea to keep the HECS coming out so at tax time I get a large lump sum back OR cancel my HECS and receive..."

    By: Sophie at Jul 31, 2017 8:38AM

    Post: Two important dates for those with HECS/HELP debts