We all want to retire richer, but are you doing anything to make that a reality? Here’s how to maximise your super, even if you haven’t got a lot of cash to spare.
While it’s easy to be discouraged by superannuation and fear you will never have enough money saved to stop working, remember that even a modest superannuation balance can make a big difference in retirement.
For every $100,000 saved in superannuation, you can expect these funds to generate a return of 6 per cent, or $6,000, a year. When this is paid out as a pension, it equates to $500 a month tax-free.
Of course, if both you and your partner have $100,000 each in super, this is doubled. Depending on your overall financial situation, this can even be paid in addition to you receiving a full age pension.
Every bit extra you can pull into your super can help you retire richer. Here are six super hacks to help you maximise your balance.
Hack 1: Consolidate your accounts
Consolidate all your superannuation accounts into one account best suited to your needs. The Australian Tax Office says some 6 million Australians have multiple super accounts, wasting millions of dollars in duplicated charges.
These unnecessary fees will needlessly erode your super balance. Consolidating multiple accounts is easy. Simply log on to the myGov website and with one click, choose one account to accept all your funds. This alone could save you thousands of dollars.
Hack 2: Review your super contributions
Check your employer is contributing the right amount to superannuation from your wages each week. An Industry Super Australia report found that almost 3 million workers lose on average $1,700 in super each year. And those ripped off on super can end up retiring with up to $60,000 less.
If you believe there is a shortfall, contact the ATO to investigate on your behalf.
Hack 3: Take advantage of co-contributions
If you earn less than $52,697 a year, consider making additional after-tax super contributions to take advantage of a matching co-contribution from the government. Under this scheme, you can contribute up to $1,000 of after-tax money and receive a maximum co-contribution of $500. This is a 50 per cent return on your investment.
The ATO will determine how much you are entitled to when you lodge your tax return. If you are eligible, the government will then pay the co-contribution directly into your fund. You don’t need to do anything more than make the original contribution from after-tax savings.
Hack 4: Benefit from spouse contributions
Review whether you can benefit from making additional contributions to your partner’s super. If you do make contributions to your partner’s super and they are on a low income or not working, you may be able to claim a tax offset of up to $540 a year.
Hack 5: Contribute any long-term savings to super
There are rules concerning how much you can contribute to super, and when, but any savings put into superannuation will be held within a tax benign environment.
During your fund’s accumulation mode, income and capital growth are taxed at 15 per cent, rather than your marginal tax rate. Later, when you receive an income stream from your super, these assets are held within a tax-free environment. This makes your superannuation your own personal tax haven.
And, if you are thinking of selling your family home to downsize to a smaller property, you can take advantage of the downsizer contribution rules. This enables you and your partner to contribute up to $300,000 each to superannuation. This one step can make a significant boost to your superannuation balance just when you need it.
Hack 6: Seek professional guidance
Of course, there are a raft of rules around superannuation that you must be aware of. To maximise your retirement nest egg, be sure to seek expert advice from a financial adviser or qualified accountant.
While it is never too early to start making additional contributions to super, it is also never too late. Even small steps towards the end of your working life will help you retire richer.
This is an edited version of an article that originally appeared on AFA Group Wealth and is republished here with permission. This article contains general information only. This should not be relied on as independent finance or tax advice. If you are after specific professional advice, speak to your registered tax agent/financial adviser or reach out to AFA Group Wealth.
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