Reference no: EM133003043
Case study - Retirement Income Streams
Peter is 58 years old, has just been made redundant from his job and received a redundancy payment of $80,000. He was with his employer for the past 12.5 years.
Peter is married to Maggie. They have two grown-up daughters who live away from home and are financially independent. Both daughters are engaged to be married with weddings likely in the next 18 months.
For the past 12.5 years, Peter has worked as an insurance assessor. In his last year of work, he earned $100,000. He currently has $500,000 in superannuation which includes a tax-free component of $50,000. Peter also owns a $250,000 share portfolio (cost price of $140,000) generating fully franked dividends of $10,000 from a publicly listed company. It is 1 July, Peter is looking to now retire and is thinking about his retirement options. He satisfies a condition of release.
1. Would you advise Peter to invest all of his superannuation funds into a lifetime pension? Discuss.
2. Calculate any tax payable on the redundancy payment received by Peter.
3. If Peter was to withdraw a $320,000 lump sum from his superannuation fund, how much tax would be payable?
4. Assume that, instead of withdrawing a lump sum, Peter will acquire an account-based pension. Prior to commencing the pension, Peter is looking to sell his share portfolio, pay any tax and contribute the balance into his superannuation account as a non-concessional contribution.
(a) What will be the minimum and maximum income that Peter is able to withdraw from the account-based pension during the year?
(b) Calculate the amount of net tax payable if Peter withdraws an income of $60 000 from his account-based pension during the year (ignore any income from the redundancy payment).
(c) If the account-based pension generates a return of 7% during the year, calculate the amount of tax payable within the fund.
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Case study-retirement income streams
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