Super - do you have enough?
Super is one of the most tax-effective ways of saving for retirement. The question is - how will you make sure you have enough?
If you'd like more information, talk to your financial adviser. If you don't have an adviser, we can help you find one.
Changes to superannuation contributions from 1 July 2017
Planning for a secure financial future is important
Australia's population is ageing rapidly. In 1967 Australians aged 65 and above made up 11.9 per cent of the population. By 2006 the level had risen to 13.3 per cent. And here's a glimpse into the future - the Australian Bureau of Statistics forecasts that in 2047 it will be 25 per cent - in other words, about one retiree for every 2.4 Australians of working age. Kind of scary!
Not only are we an ageing population, we're also living longer. Life expectancies for both men and women have increased, and this means that we now need to plan for at least 20 years in retirement.
The problem is, there's a significant difference between what we expect from our retirement and what most of us will actually be able to afford.
For most people the Superannuation Guarantee (9.5% of your salary) will probably not be enough to support you comfortably in your retirement. If this sounds like you, it's not too late to start planning for a secure financial future.
What do you need to know about super?
Super is one of the most tax-effective ways of saving for your retirement. The maximum rate of tax you'll pay on your earnings in your super fund is 15% and you're not charged tax on withdrawals from super once you turn 60, whereas earnings on your normal savings outside super are taxed at your marginal tax rate, which can be anywhere up to 46.5%.
While you can shift your super between super funds, just remember contributions to super are almost always compulsorily preserved. This means that you generally can't withdraw the funds until you are over 56 (increasing to age 60 if you were born after 1 July 1964) and meet a condition of release.
What is the best way to make sure you have enough super to retire?
Start saving today! Even a few dollars a week can make a big difference to the sum of money available to you when you retire. Basically, the sooner you start saving, the more time your money has to grow. When you invest regularly, no matter how little you put away, you'll enjoy the effects of compounding. Compounding happens when income earned on your savings is re-invested, so you earn money on your initial capital as well as on any income you have already earned.
So it's much better to start investing small amounts today than wait until you can invest a larger amount. The best way to do this is to arrange a direct debit from your pay or bank account into the investment account you have chosen. Successfully investing requires you to regularly maintain your investment plan.
Simple steps to success
If you're thinking about changing super funds, you should consider the following:
Consolidate your superYou can sometimes save on administration costs if you have your entire super in one fund. If you’ve got super in a number of different accounts, you’ll need to consolidate them to save on administration costs.
Top up regularlyMaking contributions to super can be a very tax-effective method of saving, although additional tax is charged if you exceed the allowable caps. If you earn less that $61,920 you may be eligible for a Government co-contribution which will make your contribution even more effective. Speak to your adviser for details.
Take up insurance via your superIn certain circumstances, you may get better rates if you take out your insurance through your super account.
'Best of breed' investment optionsYou should be able to access a ‘best-of-breed’, performance-based investment menu – ensuring that you achieve a portfolio of investments suitable for your needs.
Stay informed and up-to-dateYou will be able to access your account information online 24 hours a day, 7 days a week.