In this article, our financial advisors provide tips on how to increase your superannuation while you are still earning an income and have time on your side. It is not uncommon for people to neglect their super savings and assume it will be sufficient for retirement, or rely on the government’s pension as a backup plan. However, some may not be eligible for the pension or it may not be enough to sustain a comfortable retirement. As such, it’s important to ask “how much super do we need?” and “how can we boost our super savings?” Based on the Association of Superannuation Funds of Australia’s (ASFA) December 2022 figures, individuals and couples around age 67 would need an annual budget of around $46,462 or $69,691 respectively for a comfortable lifestyle, assuming they own their own home. In this article, our advisors share their top 10 suggestions to help you maximize your super savings and achieve the retirement you desire.
Tip One: Voluntary tax-deductible contributions
Voluntary tax-deductible contributions can be made in addition to what your employer pays you under the super guarantee, if you meet the eligibility criteria. These contributions are made using after-tax dollars, such as transferring funds from your bank account to your super. You can claim a tax deduction for these contributions when you file your tax return. Contributing to your super and claiming a tax deduction can be advantageous if you receive additional income that would otherwise be taxed at your personal income tax rate, which is often higher. Additionally, if you have sold an asset and need to pay capital gains tax, you could consider contributing some or all of the proceeds to your super to claim a tax deduction. This strategy may help to reduce or eliminate the amount of capital gains tax owed.
Tip Two: Consolidate Multiple Super Accounts into the One
Consolidating all your superannuation into one account can simplify your financial management in the long run. It means dealing with one set of fees, less paperwork, and easier management of your investment strategy to meet your specific requirements. However, it’s crucial to exercise caution when transferring your super into one account, as you may encounter exit or withdrawal fees, tax implications, and loss of some benefits, such as insurance coverage. It is advisable to seek professional advice before making any decisions. Our advisors can assess your superannuation terms and conditions to determine if consolidating your accounts is feasible and advantageous for you.
Tip Three: Locating Your Super
It is common to lose track of some of your superannuation especially if you have changed jobs, addresses, or worked part-time or casual jobs over the years. This can result in multiple sets of fees being paid for different super accounts. It is advisable to check if the Australian Taxation Office (ATO) is holding any unclaimed superannuation on your behalf, as some super funds transfer the balance of small, inactive accounts to the ATO
Tip Four: Benefits of Salary Sacrifice Into Your Super
Salary sacrifice allows you to opt for a portion of your pre-tax income to be paid into your superannuation by your employer, in addition to the amount they contribute under the superannuation guarantee. Although it reduces your take-home pay, salary sacrificing can lead to tax savings because the contribution is taxed at 15% (or 30% for incomes over $250,000), which is generally lower than the tax rate on your income. This makes it an attractive option for most Australians looking to save on taxes.
Tip Five: The Potential of Downsizer Contributions into Your Super
Individuals who are 55 years or older have the option to contribute up to $300,000 to their super using the funds gained from selling their primary residence. This is applicable regardless of their employment status, super balance, or previous contributions. Couples can also leverage this opportunity, allowing up to $600,000 per couple to be contributed towards their super. However, it is important to be aware of the potential benefits, rules, and other considerations before making such contributions. At Vogue Advisory Group, our financial advisors can provide guidance on this and clearly explain the requirements.
Tip Six: Boosting Your Partner’s Retirement Savings
Consider making spouse contributions if you want to boost your partner’s retirement savings or vice versa. If eligible, you can contribute to your spouse’s super fund and claim an 18% tax offset on up to $3,000 by filing your tax return. To qualify for the maximum tax offset of $540, you must contribute at least $3,000, and your spouse’s annual income should not exceed $37,000.
Tip Seven: Government Co-Contribution for Low to Middle-Income Earners
For low to middle-income earners who make after-tax contributions to their super fund without claiming a tax deduction, there is a potential government co-contribution of up to $500. If you earn less than $57,016 in the 2022/23 financial year and make at least one voluntary after-tax contribution to your super fund, you are eligible for the maximum co-contribution of $500. As your income increases between $42,016 and $57,016, your maximum entitlement will gradually decrease. If your income is equal to or greater than the higher income threshold of $57,016 in the 2022/23 financial year, you will not receive any co-contribution.
Tip Eight: Discover Your Super Investment Options
Many superannuation funds provide a variety of investment options and asset classes, allowing you to choose the most appropriate one based on your risk tolerance and investment timeline. Starting your retirement planning early gives you more time to weather market fluctuations, which may mean you are willing to take on greater risks in the hope of earning higher returns. Conversely, if time is limited, adopting a more conservative approach may be prudent. Our team of financial advisors can help you make informed investment decisions that align with your retirement savings goals.
Tip Nine: Review your Super Regularly
It is crucial to ensure that your superannuation is benefiting you. Therefore, reviewing it annually is essential. The review should include an assessment of the fund performance, keeping in mind that past performance may not indicate future performance. Additionally, you should scrutinize any fees you might be incurring and the insurance coverage you have in your super fund to ensure that it caters to your current needs.
Tip Ten: Seek Professional Advice – Vogue Advisory Group
At Vogue Advisory Group, our team of experienced advisors can provide you with comprehensive advice on your current superannuation fund. We understand that everyone has unique retirement plans and financial goals, which is why we take the time to actively listen to your needs and provide you with tailored advice. Our team of experts can review your current super fund and assess its performance, fees, and insurance coverage to ensure that it is working for you. We can discuss your investment options and provide guidance on how to maximize your savings to meet your financial goals. With our help, you can take control of your superannuation and feel confident in your financial future. Contact us today to schedule a consultation with our team.