How to boost your superannuation
Ways to super-size your super! Read on for tips on getting your finances in line so you can retire comfortably
About 10% of your income goes into super, so it is best to make sure you understand how it works and how to make the most of it. Taking some simple steps and precautions with superannuation could potentially leave you thousands of dollars in front.
TODAY spoke with Infinite Wealth managing director Tim Guest for some advice on how to make the most out of your hard-earned money.
TODAY: So, where is the best place to start?
GUEST: One of the most effective ways of boosting your super is to just keep it simple. Most of us are relying on a superannuation to retire but we probably won’t even spend 15 minutes thinking about. Tracking down and consolidating your superannuation could leave you tens of thousands of dollars in front.
Let’s consider how most Australians are introduced to superannuation. We never chose a fund; we probably just took the fund that was offered when we got the job. Then when we got a new job and we got new fund. The average Aussie has four superannuation funds. That’s four sets of fees. Simply by consolidating and rolling your multiple superannuation accounts into one fund is going to save you a stack of money on fees and leave you better off in the long run. One of the problems that many people find here though is that due to changing jobs and moving house we often lose track of our super. The ATO has reported there is $18 billion, yes that’s right, $18 billion dollars’ worth of unaccounted for superannuation. If some of that is yours, you don’t want to miss out on that money. Simply google “Find Lost Super,” it will take you to the MyGov website where you can enter a few details and it will find all your lost super.
TODAY: Once all your super’s in the same place, what should you do next?
GUEST: Once you have simplified your superannuation, we want to now set it up so it has the best opportunity to grow between now and your retirement. Typically, your super will end up in a funds default option, generally a “balanced fund” that spreads your money across a range of asset classes. That’s not a bad place to start but depending on your stage of life their might be better options. As an example, if you are under 45, you might be better with a growth option. There can be more volatility in that option however its likely to produce a better return in the long run.
Next, one of the secrets of smart investors, is they don’t necessarily focus on getting returns greater than the market, where they beat everyone is by reducing their costs. As the banking royal commission has shown us, the industry skims $31 billion in fees each year from our superannuation funds. We have some of the highest investment management fees in the world. How does that impact your super? You could lose up to a third of the super you accumulate in fees.
By simply moving your super into a fund that invests in ultra-low cost index funds, that way you produce market returns but significantly reducing your fees could give benefit you by six figures over the life of your super. Finally, most superannuation funds include coverage for Life Insurance, Total and Permanent Disability Insurance and sometimes even income protection. Depending on the stage of life you are at, it’s important to ensure you aren’t paying for cover you don’t need or that the coverage you have is adequate for what you need.
TODAY: What more can you do to retire comfortably?
Tim: If you follow these steps, chances are it will give you enough to get by, but probably not enough to have the retirement you deserve. I’m going to let you in on something that most people don’t realise. Super is one of the best investment strategies there is. Sure, it produces the same kind of returns that most assets do — so why is it any better? Because the government don’t trust you to save for your own retirement, they provide massive tax benefits and incentives for adding to it and this is why it leaves most assets in its dust.
You can voluntary put additional contributions into your super and access tax breaks of up to a third of what you currently pay in tax. By putting some of your take home pay into super you could be setting yourself up for a nice big tax refund at the end of the year. Or you can even speak to your employer about the possibility of salary sacrificing and have your additional contributions come out of your before tax pay, reducing the amount of tax your employer has to take out of your pay every single week.
You should also look into whether you are eligible for Government co-contributions. For low and middle income earners, providing you make $1000 worth of additional contributions, the government may top up your super by as much as an extra $500 per year. Finally, if your partner earns less than you or isn’t working, you may be able to access additional tax benefits by contributing to their superannuation.
TODAY: And is there anything more you can do to maximise your super?
GUEST: For first homebuyers, the recently introduced First Homebuyers Super Saver Scheme could help you save a deposit 30% quicker than traditional savings accounts helping you get your foot on the property ladder quicker. At the other end of the spectrum, for people over 65 looking to downsize the family home, you may be able to contribute some of the proceeds of the sale to your superannuation balance.
Finally, as of July 30, a significant change has been made regarding your concessional contributions. It used to be the case of “use it or lose it” so you may have missed out on opportunities to contribute to super. An upcoming change means that, in future, if you don’t use your entire concessional cap, and you’re eligible, you can make ‘catch-up’ concessional contributions and access the lower tax rate for income or returns you have made outside of your super.
The most important thing to remember is that before you make any changes regarding anything I’ve mentioned, I recommend speaking to a licensed professional to consider the right strategy for your circumstances.