Superannuation and Retirement Planning

Superannuation and Retirement Planning

Answer 1)

Options are Available to Michael

On retirement, Michael's lifestyle is deemed to change in terms of the continuous income flows and consumption patterns. There are a number of options available for Michael on retirement for him to be able to be a prudent individual in terms of planning ahead for his future. He first needs to consult retirement experts if he is un ware of the available retirement plans that can work for him. Retirement experts will be able to advice Michael on the best retirement plans out there in the market and the relevant steps that Michael should take in order to achieve his goals for the future. Retirement planning strategies can also be pursued individually by Michael although it is normally advised that one consults with experts in any financial service providers. All in all, the options available to an individual when doing a general financial plan are somehow similar to those of retirement planning in aspects of investments.

Superannuation is a method of accumulating resources where a certain amount of money is set aside in regular intervals and saved or invested in a project. This method is a good one to use when employed in order to raise funds for retirement. Superannuation for retirement can be made from personal funds or contributions by the employer. The superannuation funds must be maximized in order to make a contribution and help one after retirement. Superannuation is done by requesting an employer to deduct a certain amount of money from ones salary for a given period of time. Superannuation can also be voluntary where an employer pays an extra amount on top of an employee's salary as superannuation. The advantages associated with a superannuation funds is that they have tax advantaged and the employer contributes too.

Options available for Michael on his termination payments and superannuation balance include investing in viable capital markets that include the stock markets to buy stocks, bond markets whereby he can purchase bonds. Bond purchase is a suitable option for Michael in that bonds are very secure investments offering very minimal or no risk especially when they are issued by the government. Michael can also buy financial instruments such as futures, options, commodities among other instruments. This is however not advisable because such instruments are highly volatile which can affect Michaels investments. In general, Michael should chose the options that are guaranteed and secure like bonds among other retirement related benefits/options that may be available (Barbara Smith, Ed Koken, 2011).

B. Resultant tax treatment

Tax is an important consideration for all investments, but particularly so for super, which enjoys lower tax rates not available to other types of investments.

Tax on contributions

All contributions for which a personal tax deduction is claimed and all employer contributions are generally taxed at a rate of 15%. In addition, any superannuation rollover that contains a taxable component which is made up of an untaxed element that is rolled over into the Fund is liable for ...