Did you know that if you don’t manage your superannuation properly now, you could end up living below the poverty line later in life?
New research has shown that most Australians will outlive their super funds, meaning by the time they retire, they won’t have enough money put away to support themselves through old age!
With better healthcare and quality of life, the average Australian is now living longer. In fact, most Australians are living for more than 20 years after the age they retire, whereas in the past, people would have lived less than a decade in their retirement years.
Put simply, you will need to plan for a much longer retirement than your great-grandfather did!
Incredibly, most Australians aren’t putting in the effort to ensure they’re saving enough for their retirement, and they’re putting themselves at a very high risk of outliving their super funds.
At the current rate of super contributions, many people will have super pensions returning less than $15,000 per year in their retirement, which makes for some pretty tough living by today’s standards!
So how can you manage your superannuation fund now to ensure you have a healthy nest egg to see you through retirement?
Nexia Court & Co takes you through its super tips for a healthy retirement fund:
1. Don’t procrastinate
“Don’t put you’re superannuation in the too-hard basket,” says Nexia’s Financial Services Partner, Craig Wilford. “Procrastination is the worst thing you can do for your financial future.”
“Superannuation is one of the most critical investments facing every Australian,” he says. “The earlier you start taking your superannuation seriously; the better off you’ll be in the long term. So, start planning now to ensure you’re well prepared for your later years in life.”
This is more important than ever now that concessional contribution limits have been reduced so dramatically. Previously, much higher limits later in life allowed you to make ‘catch up’ contributions after the mortgage was repaid and the kids had (finally) left home. In many cases, the contribution limits have been reduced by over 75% compared to the levels they were just a few short years ago.
So now there is a lot more onus on all of us to look at our retirement savings from an earlier age.
2. Go beyond the basics
“Sure, you only have to contribute 9%,” says Craig. “But that doesn’t mean you can’t contribute more. The more you put away in your account now; the better off you’ll be later. It’s pretty simple. You can voluntarily contribute funds to your superannuation account, and best of all, you can actually gain some tax exemptions for doing so.”
[Next: Take advantage of Government incentives]
3. Take advantage of Government incentives
The Australian Government will match your after-tax super contribution dollar for dollar up to a maximum $1,000 if you earn less than $31,920 per year. The contribution reduces if you’re earning more and cuts out when you’re earning $61,920 or more per year.
4. Salary Sacrifice
“Salary sacrifice to your super if you can afford to,” says Craig. “This tax-effective strategy can give your super savings a real boost.”
Salary sacrificing is a clever way to increase your superannuation balance, while gaining tax benefits. Why? Because the contributions you salary sacrifice into your super is taxed at a flat rate of 15 per cent, instead of the marginal tax rate your salary is taxed at.
And once invested in super, those funds will continue to accumulate at a concessional tax rate, allowing you to build a bigger nest egg for retirement than you might have otherwise.
5. Merge your super into one account
If you’ve changed jobs in your lifetime, chances are you’ll have more than one superannuation account floating around. In fact, many Australians have several, some of which they aren’t even aware of!
“Make sure all your super is in one place,” says Craig. “If you have more than one superannuation account, you aren’t doing yourself any favours. You’re paying fees for every account, so you end up diminishing your precious nest egg. The best thing you can do is track down your superannuation accounts and roll them into one.”
To find your lost super, you can log on to the Australian Tax Office website and use the SuperSeeker tool, at www.superseeker.super.ato.gov.au or call the self-help line on 13 28 65.
6. Seek professional help
It’s a good idea to talk to your current financial adviser if you think your current investments won’t be sufficient to fund your retirement.
“Your financial adviser can help you calculate how much you’ll need to get you safely through your retirement years, and how you can get there, by using strategies that boost your retirement savings,” says Craig. “A financial plan that’s tailored to suit your needs in both the short and long term can help you grow wealth so you can look forward to a comfortable future of dreams fulfilled.”
