July is the most popular time of year to retire as new retirees can receive their unused leave payout in a new financial year in which they may have little other income, and so pay less tax on that leave pay.

Whether people are considering retiring this July or next, there are steps they should take now to optimise their retirement position. It’s important to get all their proverbial ducks lined up.

Perhaps the first step is to finalise all loans involving non-tax-deductible debt. Car loans, personal loans and credit card debts should all be paid off. The interest rates are usually higher and the lack of a tax benefit means they are a cost to avoid in retirement. Home loans are best gone too.

It may pay to finalise tax-deductible loans as well, as there is little or no tax saving when income is low. Investment loans can be retained if strong capital growth is likely fairly soon.

Retirees who plan to continue earning an income as consultants, casual workers or company directors may also find it worthwhile to retain deductible debts on growing assets as the interest deduction will still be valuable to them.

If an intending retiree’s car is old and needs upgrading it is usually best to do that before retiring. If their home needs repairs and maintenance they may prefer to get that done and paid for while they are working too. However some people make it a retirement project.  

It is very important to maximise our superannuation before retiring. Contributions over the last year or two can provide a significant boost. A bigger super balance means more income for the rest of our lives.

It is often smart to top up tax-deductible contributions to the $30,000 limit including employer super guarantee amounts. This can bring tax refunds. People whose super balance is under $500,000 may also be eligible to catch up past contributions they missed.  

Non-deductible super contributions can provide a big lift for balances. Their limit is much higher at $120,000 per year. If intending retirees have funds available, they can bring forward two future years’ contributions for a total of $360,000 immediately.

Retirees could also contribute their leave payouts to super after retiring if they are under age 75.

Age pension qualification is at 67, so for some it will be important to plan around that. Younger retirees will require a self-funding income plan until then.

If these ducks aren’t yet in a row, it may be best to work a little longer, especially for those happy at work. Whether finishing this July, next, or the one after, planning now will improve retirement outcomes.