Your retirement may just be a few or several years away, but it is never too early or too late to consider topping up your superannuation. Whether you are just beginning to work or getting close to retiring, super are extremely important.
Super is the money you saved throughout your working career. By paying smart and regular contributions over your working life, eventually, you will probably have significant cash savings that can aid you to pay for your life after retirement.
Most Australians are a bit conservative to this superannuation, but experts say that one of the best ways to boost your nest egg is to be more aggressive. It's a simple decision that could own you thousands if you're prepared for the tradeoffs.
Here are a few reasons why boosting super is very important:
1. Retirement can last very long
Once you have semi-retired or fully retired, your primary source of income will diminish or cease. Because of this, it's imperative that you have sufficient funds to cover your lifestyle for the rest of your life. A lot of Australians underestimate the amount of money they'll require for retirement. Also, remember that people nowadays are living longer.
2. Age Pension may not be enough
While Australia provides Age Pension to eligible citizens, the amount you get may not be sufficient to provide you with your preferred lifestyle or meet your current monetary obligations. After working so hard for many years, it is crucial that you revel in your retirement days.
For instance, you may have travel plans upon retirement. You may want to try out new hobbies, join new classes, or enter new memberships because you are no longer working. So if this is the case, then it can be helpful to supplement Age Pension by using your super, for instance, as an income stream.
7 Super Tips to Boost Your Nest Egg
Below are a couple of ways you could add to your superannuation savings.
1. Salary sacrificing
Let's assume that you have $100 of income. We pay a marginal tax rate of 0 in the first $18,200, and after that, we're paying 19% right until a top rate of 45%. So let's take the "middle-of-the-road" tax bracket of 37.5% which is what you will be paying around a $50,000 income.
So in this instance, you pay $37.50, which means that on a $100 that you're earning, you got $62.50 to save for the future.
Now you can say to your employer that you want your $100 paid straight to your super. When it goes to your super fund, you're going to pay a maximum rate of 15%. This means that at the end of the day, you've got $85 left to save for the future.
It's an extremely tax-effective strategy, and it's simple but effective. Small amounts saved over an extended period will make a significant difference in the value of your nest egg when you're ready to retire. Give it a go! You won't be disappointed.
You can find more information about salary sacrifice through our Helpful Resources – Australian Super Finder Helpful Resources
2. Get assistance from the government
This is one of the simplest ways to boost your super savings. With some tax-free money from the government, it would be easier for you to enhance your nest egg, especially on a low income. Superannuation co-contributions aid eligible individuals to increase their retirement savings.
If you are a low-wage or middle-wage earner and pay personal or after-tax contributions to your fund, the Australian government also contributes (co-contribution) up to $500. To be eligible, you need to satisfy the work test, an income test, and an age test to qualify for this extra money.
Qualifying means that if you earn $34,488 a year of less before-tax, and make an after-tax contribution into your super, the government will pay 50 cents for every dollar you put it - to a maximum of $500 a year, on your contribution of a $1,000.
The amount the government co-contributes depends on your salary as well as the amount of your contribution. So for example, if you make a $500 contribution this year, the government will put in a co-contribution of $250 into your super.
You may qualify for some co-contribution if you earn more than $34,488. The amount reduces for every dollar that you earn above $34,488 until it reaches 0 for anyone on a salary of $49,488 or more.
When your tax return is lodged, the government will work out if you are eligible. If your super fund has your TFN or Tax File Number, they will transfer it to your super account directly.
How the co-contribution is calculated varies according to the financial year in which you paid your superannuation contributions.
You may qualify either the superannuation co-contribution or the LISTO (low-income super tax offset) or both, meaning the government contribute to your super.
Check the ATO or Australian Taxation Office website to learn the requirements for qualification and how to apply for one if you have to.
3. Spousal contributions
If you or your partner have a low income or is taking time off work, then it is highly likely that you or your partner is not earning much superannuation. This indicates that your superannuation can fall behind, and it is a huge matter in Australia.
Fortunately, there are many ways you can aid your partner's super to continue to increase and vice versa. You or your partner can carry this out by:
It is completely up to you to decide whether contribution splitting or spousal contribution is an excellent option for you. It will vary according to numerous factors such as:
So it is crucial that you talk to your financial advisor or super fund.
If you're on parental leave, then you're working spouse could contribute to your superannuation. This will guarantee that your super account is still being paid to, even when you are not getting regular contributions from your work.
Aside from contributing to the super of your spouse, you can also decide to have a portion of your contributions added into their super account, providing they are under the preservation age (or between the preservation age and aged 65 and not retired).
Superannuation contributions can be split only in the financial year directly after the year wherein the contributions were paid, or in the same years as the contributions were paid only if you withdraw your entire benefit before the financial year end as a lump sum benefit, transfer, rollover, or a combination of these. A few funds may charge fees just to do this.
There are two kinds of contributions that you can split:
For more information about spousal contributions, talk with your fund or financial advisor because they will be able to guide you through the entire process.
4. Bring your superannuation together
Consolidating our super can be an easy way to provide your super with a boost – by lessening your number of super accounts, there is a great chance that you will also reduce your fees.
If you have had several different jobs – including any full-time, part-time or casual jobs – it is very likely that you have numerous super accounts. If you do, then it is likely that each fund is charging you fees.
If you have lost track of your super accounts or have numerous accounts, you may be paying numerous sets of fees. Also, there is millions of dollars' worth of lost and unclaimed superannuation in Australia. Think about checking them with the ATO for your lost super and consolidating them into a single account so you can monitor it easily.
Before deciding, you should compare the benefits, risks, and costs of your different funds. Also, it is a great notion to consider things such as fees, loss of insurance coverage, investment strategy, and any costs for rolling over.
We have assisted thousands of our members to consolidate their super accounts, and we even discovered lost super that some members haven't monitored. So consider rolling over your super into a single fund now!
A few of the benefits of consolidating your superannuation with Australian Super Finder include:
If you do not know where your super accounts are, then don't you worry, we can track down any lost super or the ones you did not know you had. Go to our Home Page for more details.
5. Watch your limits
Payment caps limit how much you could contribute to your super in any one fiscal year without incurring more tax. They are designed to stop individuals from taking unreasonable advantage of super's tax treatment while urging those who need to add the most to do so.
Note that the government has established caps limits for the level of contribution you can make into superannuation for every financial year. Make sure that you know the present limits as well as how they have changed since July 1, 2017, so you do not get charged further tax.
The government caps the tax benefits of these super contributions. And any super contributions over the annual caps are bound by an additional tax.
Concessional contributions cap
Concessional payments are settlements made by your company from your pre-tax income or individual contributions you may make, for which you're eligible to declare a tax reduction, based on particular conditions being met.
Concessional contributions are strained at 15 % when they enter your super fund. So, surpassing the caps can be a costly error. Any payments over the limits will be strained at your marginal revenue tax obligation price (up to 49 % including Medicare plus various other applicable levies) rather than 15 %, and you will certainly be responsible for the excess concessional payments requirements.
Employer contributions – including your salary sacrificed amounts – are called "concessional contributions," and the concessional contribution caps for the financial year 2014-2015 are the following:
Concessional payments are set at 15 % as they enter your super fund. Thus, exceeding the caps can be a costly error. Any contributions over the limits will be exhausted at your minimal earnings tax price (up to 49 % consisting of Medicare levy along with other applicable taxes) instead of 15 % you will certainly be accountable for the excess concessional contributions bill.
Even if you surpass the caps by making an unintentional error, you will still have to pay the higher price of tax obligation. So keep the documents of your super contributions, and then inform your financial advisor and tax advisor, so that you do not end up exceeding the caps.
Non-concessional (after-tax) contributions cap
Personal contributions paid from after-tax wage are called non-concessional contributions. For 2014-2015, the non-concessional contribution cap is $180,000 annually; or if you are under 65, the non-concessional contribution cap is $540,000 over three years.
Check out our news section for the latest news or info about the super contribution caps as well as the tax treatment of additional contributions – Australian Super Finder News
6. Make Non-Lapsing Death Nominations
A non-binding death nomination is a document that should accompany the rules of the superannuation fund whether it's an Industry Fund, Retail Fund or Self-Managed Superannuation fund. It's the document that directs the trustees of the superannuation fund and how you want your superannuation benefits to be paid.
As the name states, it is "binding death nomination," so it does bind the trustees to pay them exactly how you want them to go. Keep in mind that these assets won't go to your home unless the nomination states you want to go over your estate.
Otherwise, if you nominate that your partner will go directly to them, then the trustees will be bound to that. In the past, when they say "non-binding nominations used" then there's the scenario of the trustees of your retail superannuation fund and you asking for the rules and a lot of documentation for a lot of people to make sure that you will be able to pay the money to your beneficiaries.
In those times it did make the whole process much lengthier of what a binding death nomination would have provided. When it comes to important documents, I recommended that you trust all of these to your financial adviser in conjunction with your solicitor to discuss these issues.
You may think there isn't much in your superannuation, especially if you're young. But naturally, there will be some insurance in there. So you may think there isn't much there, but when you pass away, there could be hundreds of thousands of dollars for your folks. So getting this documents right can boost your super.
Do not assume your superannuation will always benefit the beneficiaries nominated in your Will. This may just be true if your estate receives your super survivor benefit. To make sure your super fund pays off according to your will, you can make a Binding Survivor Benefit Nomination or a Non-Lapsing Survivor Benefit Nomination, which is binding.
Not all super funds offer such choices (although many do), so talk to your financial adviser on the best way to indicate your choice concerning the allotment of your super in the event of your death.
7. Know When You Can Access Super and Make Early Contributions
This may sound unconventional and simple but the experts say opting for a more aggressive super investment is best early on. You have that time-frame to be able to write out any volatility in those investments.
Conservation rules indicate you can't access your super till you satisfy a condition of release. This indicates:
Reminders: Higher risk in super options is certainly attractive if you're looking to boost your nest egg but be aware that you can expect a loss for around five years in every 20. To make these changes, contact a financial adviser or your super fund directly.
It's always a sound decision to do more for your super. 1 or 2% return over the long-term could mean hundreds of thousands of dollars by the time you get to retirement. Your long-term return will depend on where you choose to invest.
For example, the lowest risk or 100% or term deposits can offer a return of 2.9%. A balance mixed of 70% shares and property, and 30% cash has a moderate risk but an expected return of 5.7%. A more aggressive option of 80& shares and property can bring a return of around 6.2%.
Probably one of the biggest mistakes people make with their superannuation does not know where it is invested. Doing the ideal thing for your retirement also means knowing what not to do under such circumstances. The tips above will aid you in making the most of super contributions.
By investing in a bit of extra now, you could make a difference in the future.
Disclaimer: All information on this website is of a general nature only. We have not taken into account your financial situation, needs or objectives. You need to make up your own mind and ascertain yourself if it is right for you. We recommend you read the product disclosure statement(s) and the financial services guide before making any financial decision.