Superannuation is a long-term financial relationship. It begins with our first job, grows during our working life and hopefully supports us through our old age.
Throughout your super journey you will experience the ups and downs of bull and bear markets so it’s important to keep your eye on the long term.
The earlier you get to know your super and nurture it with additional contributions along the way, the more secure your later years will be.
Like all relationships, the more effort you put into understanding what makes super tick, the more you
Check Your Account
The first step is to check how much money you have in super and whether you have accounts you’ve forgotten about.
You can search for lost super and consolidate all your money into one fund if you have multiple accounts by registering with the ATO’s online services (https://www.ato.gov.au/Individuals/Super/Growing-your-super/Keeping-track-of-your-super/#Checkyoursuper). Having a single fund will avoid paying multiple sets of fees and insurance premiums.
The next step is to check what return you are earning on your money, how it is invested and how much you are paying in fees.
The difference between the best and worst performing funds could fund several overseas trips when you retire, so it’s worth checking how your fund’s returns and fees compare with others. You can switch funds if you are not happy, but it’s never wise to do so based on one year’s disappointing return.
State Your Preferences
Default options are designed for the average member, but you are not necessarily average. Younger people can generally afford to take a little more risk than people who are close to retirement because they have time to recover from market downturns. So think about your tolerance for risk, taking into account your age, and see what investment options your super fund offers.
Also check on your insurance in your super. From 1 July 2019 you will not be provided with insurance cover through your super fund if your super account is termed, ‘inactive’ – unless you specifically choose to keep your insurance cover.
Building Your Nest Egg
Once you understand how super works you can take your relationship to the next level by adding more of your own money. Small amounts added now can make a big difference when you retire.
You Can Build Your Super in Several Ways:
- Pre-tax contributions of up to $25,000 a year (including SG amounts), either from a salary sacrifice arrangement with your employer or as a personal tax-deductible contribution. This is likely to be of benefit if your marginal tax rate is higher than the super tax rate of 15 per cent.
- From 1 July 2019, you may increase your concessional contribution cap by carrying forward your unused concessional cap space amounts if you have a total superannuation balance of less than $500,000.
- After-tax contributions from your take-home pay. If you are a low-income earner the government may match 50c in every dollar you add to super up to a maximum of $500 a year.
- If you are 65 and considering downsizing your home, you may be able to contribute up to $300,000 of the proceeds into your super.
- You could also share the love by adding to your partner’s super. This is a good way to reduce the long-term financial impact of one partner taking time out of the workforce to care for children. You can split up to 85 per cent of your pre-tax contributions with your partner. Or you can make an aftertax contribution and, if your partner earns less than $40,000, you may be eligible for a tax offset on the first $3,000 you put in their super.
Before you make additional contributions, adjust your insurance, or alter your investment strategy, it’s important to assess your overall financial situation, objectives and needs. Better still, make an appointment to discuss how you can build a positive long-term relationship with your super.
If you have questions or would like arrange a no cost first appointment, please contact us on (03) 6344 3899 or send us a message online to arrange a time.
The articles on this website are of a general nature only and are not to be taken as recommendations as they might be unsuited to your specific circumstances. The contents herein do not take into account the investment objectives, financial situation or particular needs of any person and should not be used as the basis for making any financial or other decisions.
InterPrac Financial Planning Pty Ltd directors and advisers may have investments in any of the products discussed in these articles or may earn commissions if InterPrac clients invest or utilise any services featured. Your InterPrac Financial Planning adviser or other professional advisers should be consulted prior to acting on this information. This disclaimer is intended to exclude any liability for loss as a result of acting on the information or opinions expressed.