After 20 years of compulsory super, the average payout on retirement is $197,000 for men and just $105,000 for women.1 Not nearly enough to live the life you’ve become accustomed to.
Working-age Australians know they need to put money aside to prepare for life after work. The stumbling block is finding the extra cash when we have more pressing needs, such as repaying the mortgage and paying school fees.
The good news is that it’s possible to improve your retirement outlook without jeopardising your immediate financial goals. Here are eight ways to boost your super:
1. Consider less conservative investments
The return you receive on your investments depends on the amount of risk you take and the length of time you remain invested.
In the long run, returns from higher risk investments such as shares outpace cash and bonds by a country mile. If you still have 10 years or more until retirement, and even at retirement if you expect a long life, you can afford to accept more risk because you have time to ride out any short-term market fluctuations along the way.
2. Consolidate accounts
If you’ve changed jobs over the years, you may have ended up with more than one super account.
By consolidating your super in a single account you may be able to reduce the annual fees you pay. By reducing fees, you will have more money left to work hard for your retirement.
In some cases, depending on your circumstances, consolidation comes at a cost. You might decide to keep a second account to avoid losing insurance, increased taxation of benefits or exit fees. You should also remember that other key features are relevant when choosing a super fund, such as performance.
3. Find lost super
Have you done work in the past and are unsure if you were paid super? Do a quick online check at the Australian Taxation Office (ATO) website for lost or unclaimed super.
There are billions of dollars in unclaimed super. Simply provide your name, date of birth and tax file number to find out if your name’s on any of it.
4. Review your super
Get into the habit of reviewing your super when you receive an annual statement from your super fund. Check the fees, your investment option and long-term returns.
Are you getting value for money? Are the returns on track to meet your retirement objectives? If not, compare funds to see if there is a better option.
5. Take advantage of government contributions
If you are eligible and earn less than $34,488 in 2014-15 and make a personal super contribution, the government will match it with 50c for every dollar you invest up to a maximum of $500.
The government co-contribution reduces the more you earn, and phases out entirely once you earn $49,488 or more.
6. Make voluntary contributions
Salary sacrifice may sound like giving money away, but it’s just the opposite!
By ‘sacrificing’ part of your pre-tax salary, and having your employer re-direct it into your super account, you’re the winner. That’s because you pay tax on the ‘sacrificed’ amount at the concessional rate of 15 per cent – 30 per cent for high income earners – instead of your marginal tax rate you might otherwise be on, and boost your super at the same time.
If you are younger than 50 you can contribute up to $30,000 a year at this concessional rate, including your employer’s 9.5 per cent super guarantee payments. The cap increases to $35,000 a year once you hit 50.
You can also make after-tax super contributions. These are called non-concessional contributions because you don’t receive a tax deduction. But once your money is inside super any investment earnings are generally taxed more favourably than earnings outside super, so your savings grow faster.
7. Make spouse contributions
If your spouse or de facto partner has taken time out of the workforce or is a low-income earner, consider making a super contribution on their behalf.
There’s an 18 per cent tax offset for contributions up to $3000. That translates to a maximum tax rebate of $540.
8. Consider a transition to retirement strategy
Between the ages of 55 and 59, depending on your current age, you can potentially have your cake and eat it too with a transition to retirement pension strategy. This allows you to withdraw income from your super while you continue working. Combined with a salary sacrifice strategy, you can grow your super at the same time.
There are limits around how much you can contribute and withdraw, so seek professional advice before you leap in.