Here are four effective superannuation strategies to boost your retirement nest egg. Your superannuation is your gateway to your future. The more you look after it now, the more it will look after you in the future.
Make Extra Contributions
Your employer contributions (SGC) will, most likely, only provide modest retirement savings. Boost your super with additional contributions.
Salary sacrificing redirects some of your pay into your super fund before tax is paid. This means you pay less tax, and you also have a little less in each pay packet. But the additional benefit of regular investing over a long period will make a big difference.
Super contributions are taxed at 15% while your income is taxed at your marginal rate which is generally higher.
After-Tax Contributions directs some of your savings into your super fund. These contributions are not taxed on entry into your fund as you have already paid tax on your savings.
Example
Greg is just starting work and his employer is paying $150 per month into super. In 40 years, if nothing changes, Greg would have about $230,000 in super. If Greg makes a monthly after-tax contribution into super of $50, in 40 years he will have about $306,000 in super. An additional $76,000 just by making a contribution of an extra $50 a month.
Consolidate Your Super
Many of us have had a variety of jobs from an early age and we were not all that savvy about our super so we may have multiple accounts floating around. These accounts are all paying fees and may also be paying insurance premiums. They also may have vastly different investment strategies.
Thankfully recent changes in legislation have forced super funds to stop the fees for insurance premiums and also move the funds to the ATO, under certain conditions. These changes are protecting balances of these lost super accounts.
To find out if you unknowingly have multiple super funds, you can use your myGov account.
Consolidating multiple super accounts will ensure that you have all your super in one place working in your best interest with your preferred investment strategy. You will also have lower fees overall.
Manage Your Risk
The various superannuation investment options have varying levels of risk. Whatever level of risk you select needs to be appropriate to you.
Your risk profile determines how much of your super should be invested in growth assets and how much in defensive assets.
Growth assets include shares, property, and infrastructure. Defensive assets include cash and fixed interest.
The more allocated to growth assets means that there could be potentially higher returns but also potentially higher volatility and therefore potentially greater losses.
Understanding your risk profile and then selecting appropriate investment options will ensure your expectations of returns are met.
Prioritise Your Super
Because your super fund will be one of the most important parts of your retirement savings plan, you need to give it some loving every year.
Annually you should ensure that your super fund is right for you, review any changes your fund administrator has made especially regarding the investment options, review your nominated beneficiary to ensure it is up to date, and ensure you update your address with your fund so they know where you are.
These effective superannuation strategies are essential for everyone and will help ensure your retirements savings are maximised.
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At Insight IRS we offer all prospective clients a complimentary initial meeting.
Call 1300 551 267 or Email great.advice@insight-irs.com.au
