1. Ensure enough risk in a portfolio

• Greg was very afraid to take any investment risks to invest in shares or property, but knew the importance of saving for the future. He put $500 per month into a Cash Management Account which was earning a healthy 5% per annum. He reinvested all interest received.
• Georgia on the other hand was also saving $500 per month. She understood the importance of including investments that were more volatile and risky in the short term, but offered her better long term returns, so invested in a professionally managed share portfolio. Her portfolio only paid 3% per annum in fully franked dividends (which were reinvested) but it also grew at a compound rate of 4%.
• They both invested for 20 years and were both on a marginal tax rate of 30% over the time. So does the 2% additional return make that much difference?
• In Greg's case, after losing 1.5% of his 5% return to tax each year, his final balance after 20 years is a healthy $164,000, $120,000 of which was his own contribution.
• Georgia effectively paid no tax on her dividends and her final balance was $276,000. If she cashed her invest, she would have a potential Capital Gains tax liability of just under $10,000, but would still have $100,000 more than Greg.
• It works the other way as well. Many retirees think they need to "protect" their retirement nest eggs by taking little or no risk.
• For instance, if someone had an allocated pension of $100,000 and was drawing $9,000 per annum, with a 5% per annum return, their money would last just over 16 years. If slightly more risk was taken, so that the return averaged 7.5% over the long term, the investment would then last almost 24 years.

2. Contribute to Super – How much and when?

When you contribute to super, the earnings are taxed up to a maximum rate of only 15% and the tax on capital gains is at a maximum of 10%. IN comparison, the earnings of investment outsider of super are taxed at the investor's marginal tax rate, which could be as high as 46.5% (including the Medicare levy).

If you are looking to save from your after-tax income, an investment in super will grow more quickly than the same investment outside super due to the lower tax, plus there's no extra tax paid on the benefit when you retire.

If you're able to contribute to your super from your pre-tax salary, sometimes called salary sacrifice, your super contribution will be taxed at 15% but then the 15% tax on the earnings may still be considerably less than the tax on other investments.

The only drawback is that your super is locked away until retirement but if you've got the money to put away, super is a very efficient way to save.

Strategies we consider for your retirement plans include:

• how to accumulate the required funds working within the cap limits that apply to taxable and non taxable contributions;
• timing your retirement including transition to retirement strategies;
• super co-contributions; and
• strategies to maximise your Centrelink entitlements – about 8 in 10 Australians aged 65 or more get a full or part government means-tested age pension, that's indexed to average weekly earnings and gets paid as long as you live. You also get other valuable benefits if you're eligible for the age pension.

Which are the best strategies for YOUR retirement? Contact us today to arrange a complimentary initial consultation worth ($250).

Or find out more answers to your retirement questions - visit The Wealthmaker