Tuesday 8 February 2022

Annual salary review and bonus

I had my annual 'performance review' meeting with my boss today and got a 'expected results achieved' rating (mostly due to working an average of about 50 hours/week last year in order to get everything done by deadline, even when there was work emailed on a Friday afternoon due by noon on Monday that would require a couple of days to complete!) which earned my a standard bonus amount worth 10.8% of last year's salary. After allowing for tax at my marginal tax rate the bonus will provide around $7K, which I will contribute to my QSuper superannuation account via increasing my 'undeducted' contributions from the current $100 per month to $500 each month. I can't claim a tax deduction for any additional superannuation contributions as I make the maximum concessional contributions via SGL and salary sacrifice.

I plan on building up the balance of my QSuper account from now until I retire (or until I hit the total super balance cap and can't make any additional contributions into super beyond any SGL amounts) and will then purchase a lifetime annuity from QSuper ($100K in a lifetime annuity should provide around $7,500 pa, or if I opt for the 'spouse protection' option that continue to pay the pension after my death for the remainder of DWs lifespan, $6,700 pa). I will keep the remainder of my 'transfer balance cap' in our SMSF in 'pension phase' once I retire, which should provided a sustainable pension of at least 4% of the $1.7m (assuming the TBC has indexed to $1.8m by the time I retire), or $68K pa tax free. That would provide slightly more than my curren 'take home' pay. Having some income from the lifetime annuity guaranteed for life is basically a hedge against longevity risk.

I also received a 2% 'raise' in salary for 2022. Considering the CPI/inflation rate for the 12 months to December quarter 2021 was 3.5%, that 'raise' is actually a 1.5% decrease in salary in 'real' (inflation adjusted) terms. But as long as I keep my job until I choose to retire I'm not too fussed.

Hopefully this year I can get some paying clients for my part-time financial planning business, so it achieves 'break even' by the end of 2022. My 'plan' is to complete a PhD (if I get offered a place) part-time while I am still working full-time, and also slowly accumulate some clients for my financial planning business (aka 'side gig'). Then when I 'retire' from full-time employment I'll continue running my financial planning business for another decade or so. We'll see what happens.

Since my investments can gain or lose $50K in a month, the annual salary bonus and pay rise are relatively immaterial.

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