Even if retirement feels a long time away, it’s important to start thinking about when you’d like to retire, the type of lifestyle you want in retirement, how much debt you have and what assets (including your super) you will have when you finish working.
Want to see your super grow faster? Here are five ways you might be able to add to your super savings today.
Salary sacrifice is when you make additional contributions to your super from your pre-tax salary. These pre-tax contributions can help reduce your taxable income, meaning you can potentially pay less tax.
This portion of your income is generally taxed at just 15 per cent, which can be less than your normal marginal tax rate – helping you save money for your retirement.
Once you have worked out how much of your income you can comfortably contribute to your super, you need to arrange for your employer to regularly redirect this amount to your super instead of your bank account.
But it’s important to keep in mind that there are caps on the amount you can contribute to your super.
It’s a good idea to make sure all your super is in the same place. If you’ve changed jobs, different employers might have made your super guarantee payments to different funds over the years. This means you could have ‘lost super’ in accounts you’ve forgotten about.
If your super is in multiple funds, you also have to pay separate administration fees to each fund, which eats into your retirement savings.
On the other hand, if you roll over all your super into a single fund, you’ll not only save on fees but you’ll also find it easier to keep an eye on your money.
If you think you might have lost track of some super from past jobs, search for it online via the Australian Taxation Office website (www.ato.gov.au/individuals/super/keeping-track-of-your-super/) and consolidate it all into one fund to minimise fees.
Before making a decision, it makes sense to compare the costs, risks and benefits of your other funds against your current super fund. You should also consider whether you will lose any existing insurance cover upon rolling over and whether any cover you may have will be sufficient.
If your partner earns less than $37,000 a year, you may be able to claim a $540 tax offset when you make a $3,000 contribution to their super fund.
The offset available reduces as your spouse’s income exceeds $37,000 or if your contribution is lower than $3,000, and phases out once your spouse’s income reaches $40,000.
But, this isn’t just about tax. The spouse contribution – which can also be made on behalf of a de facto partner or same sex partner – is a good way to boost the retirement savings of a partner who earns less or has taken time out of the workforce to care for children.
Also, if you earn income up to $37,000, you may be eligible to receive a low-income super tax offset (LISTO) contribution into your superannuation account. This is a refund on the tax paid on your concessional superannuation contributions up to a cap of $500.
And if your spouse earns a low income, you could receive a tax offset up to $540 by contributing to their super fund for them. Find out more at the Australian Taxation Office website (www.ato.gov.au/Individuals/Super/Growing-your-super/Adding-to-my-super/Government-super-contributions/).
It’s important to keep in mind that there are caps on the amount you can contribute to your super.
The government imposes different caps on contributions depending on your age and contribution type. Additional tax applies if you exceed the contributions cap.
Get the right advice
It’s important to feel confident you have enough retirement savings before you stop working. So if you’re not sure if you’re ready, we can help.
Source: Colonial First State.