Some important risks in retirement for 2025

1. Division 296 Tax on Total Superannuation Balances over $3 million

Most retirees with total superannuation balances (TSB) of over $3 million will be aware that a new tax is coming from the 2025-2026 financial year onwards.

Individuals with a TSB in excess of $3 million will pay up to 15% more in tax on the earnings from the balance over the threshold.

The $3 million cap is not indexed over time and the tax also applies to unrealised capital gains. Australian Independent Retiree has advocated to the Labour government against the lack of indexation of the cap and the taxing of unrealised capital gains, but to no avail.

If you are potentially affected by this new Division 296 tax, you could consider moving some funds out of superannuation to other ownership structures.

For personal earnings in retirement, remember that the Seniors and Pensioners Tax Offset (SAPTO) provides a higher income threshold and could reduce the income tax on personal/couple income.

This new Division 296 tax could be a good reason to make an appointment with a financial advisor to discuss your superannuation.

2. The Future of Interest Rates

The decisions by the Reserve Bank of Australia on official interest rates will have a significant effect on households, investors and business

Homeowners and business with borrowings would like to see interest rates cut substantially during 2025. Retirees and investors who are generating an income with interest based investments would prefer to see remain at current levels for longer.

The expectation is that official interest rates will be reduced during 2025 and potentially into 2026.

Retiree investors who wish to lock in current interest rates for the longer term could potentially still find fixed interest investments with reasonable returns through a fixed-interest broker.

3. Cybersecurity attacks

Various forms of online attacks/frauds are increasing rapidly and often target older Australians.

Older Australians or retirees are targeted not only because of their perceived lack of technical knowledge about the methods of cyber criminals, but also because retirees are perceived to have more access to liquid funds in bank accounts.

As the wealth of retirees grow, so will the prevalence of scams, spam, phishing, online fraud, etc.

Older Australians can improve their safety online by taking a few straight-forward action actions. Use strong, unique passwords where possible using a combination of upper case and lower case letters, numbers and special characters. If you have many online accounts, a computer password manager will help.

Use Multifactor Authentication (MFA) where it is available. This requires an extra verification by a mobile phone or email to add an extra layer of security to the login password.

Phishing scams are where criminals pretend to be from a trustworthy organisation, so they can steal your personal identifying data. They then use this personal identifying data to create fake online accounts that third parties (like banks) think are you undertaking legitimate payment transactions.