Planning for retirement
Superannuation is an ideal investment for retirement, and there are some easy ways to build super that can make a substantial difference to your final nest egg.
Adding to your super today means enjoying a better lifestyle in retirement, and there are opportunities to grow your super that can provide immediate benefits including valuable tax savings.
You may not be able to access your super today, but it’s your money and you have control over it. Let us help you select the super fund that meets your needs and show you simple steps to boost your nest egg.
Prepare for life after work
Retirement should be an exciting time to look forward to.
With the nine to five grind behind you, it’s a chance to catch up with friends, head off on that holiday (or holidays) you always wanted, try your hand at new hobbies, or just enjoy being able to give the kids a financial helping hand in their lives, but it all costs money, something many retirees don’t have enough of. The key to a quality lifestyle is to start making plans early, exploring a variety of ways to fund your retirement.
Track down ‘lost’ super
If you've held more than one job or changed your name or address, you could have some forgotten super savings. It’s important to reunite with any lost super as this money belongs to you. The Tax Office has an online Super Seeker that lets you track down any lost super or your financial adviser can check if there’s unclaimed super in your name.
Roll multiple funds into one
If you have several super funds it may be worth combining, or ‘rolling’, multiple balances into a single fund. You can save on fund fees and it’s far easier to keep track of a single fund over time.
Before combining your super funds, make sure you are familiar with the insurance policies within each of your existing funds so you don’t cancel a valuable policy. This is something your adviser can help with.
Salary sacrifice - a tax-friendly way to grow your super
One way to grow your super savings is by ‘salary sacrifice’. This involves having part of your before-tax wage or salary paid into your super rather than receiving the money as cash in hand.
These contributions are usually taxed at a lower rate than your personal tax rate, making salary sacrifice a tax-friendly way to save for retirement.
You can also contribute to super using after-tax money from your own pocket. The appeal here is that no contributions tax applies – a saving of 15%, although contribution limits do apply. Think about using windfalls like an annual tax refund to grow your super.
A helping hand from the government
If you’re a low to middle income earner, you could be eligible for a co-contribution from the federal government. If you make eligible super contributions, the government will then match your contributions up to a maximum amount. Your adviser can help you maximise these co-contributions.
Beware of annual limits
Annual limits apply to the amount you can contribute to super – exceeding these limits can mean paying extra tax, so it pays to keep track of how much is going into your fund each year.
These limits are subject to change and are designed to encourage you to save for retirement throughout your working life, so the earlier you start contributing, the more you will be able to grow your super.
There are limits in place for both before tax contributions such as compulsory employer contributions and salary sacrifice (known as Concessional Contributions) and personal after-tax contributions (known as Non-Concessional contributions).
Super – simple, tax-friendly
Superannuation is an investment designed specifically for retirement. During our working lives our super grows through a combination of employer contributions plus returns earned on the fund’s underlying investments. Then, from age 60, we can access our super tax-free. This makes super a very attractive means of funding retirement dreams.
A super boost
Relying solely on your employer’s super contributions will leave you short-changed in retirement. It’s possible to make contributions of your own to grow your super, and this can make a significant difference to the final value of your nest egg.
Other investments matter too
Investments held outside of super can also be a source of retirement income. The downside is that independently held assets - like shares, a rental property or cash savings, don’t usually offer the same generous tax breaks as super.
A range of social security payments including the age pension, provide a financial helping hand in retirement. These payments are generally subject to eligibility criteria, and government support is pitched at a minimum standard of living – not a high quality retirement.
That’s why it’s so important to make your own plans to fund retirement.
Risk plays a key role in investing for retirement. Investments delivering high returns also involve higher risk, and it’s essential to balance returns with a level of risk you’re comfortable with at every life stage.
Retirement reality check
Giving your savings a retirement reality check – at least annually, will let you know if you’re on track to fund the sort of retirement you hope to lead. It’s easier to fine tune a savings plan at an early stage rather than waiting until you’re about to retire to take action.