September 24, 2018

6 Ways to Grow Your Retirement Income

Many people say that you should start saving for retirement as soon as you start working. However for those of us who are relatively new to the work force, they may believe that there’s plenty of time to think about it! But when it comes to superannuation in Australia, it is generally accepted wisdom that growing it as early as possible greatly helps to boost retirement income by simply giving it a lot more time to grow.

But how do you motivate yourself to do this? Here are some things to have a think about:

Set a retirement goal

Do you want to maintain a certain lifestyle in retirement? Have a goal in mind and take steps to achieve it. If you want to know how much money you need to save to provide yourself with a certain level of income which meets these, you can use a superannuation calculator to give you some estimates.

Manage your finances

Know how much money you have now, where it goes, and where will you earn money in the future. Knowing where you stand now financially will help you decide on what the next steps should be. You can improve your spending habits by reducing your expenses every week so you can have more money to be saved for your retirement.

Have a diversified investment portfolio

As the saying goes, “don’t put all of your eggs in one basket”. Investing in different asset classes such as stocks and property, is often seen as a good way to reduce risk.

Understand salary sacrificing and contribution limits

Do you know about salary sacrificing? It allows you to contribute extra money from your pay (before you pay tax on it) into your super. Limits do apply, but by doing this, you can grow your super fund balance faster while probably paying less tax than you normally would.

Delay full retirement

If possible, work longer. It may not have been the first thing you would have thought about in this list, but when it comes to retirement, delaying it provides benefits like keeping your mind and body active. It might even give you an opportunity to try working in a role that you’ve always wanted to.

Combine your super accounts

Consider combining your super accounts into just one account to save on fees and charges. It also makes it easier to see your super’s performance over time, by looking at just one statement.

Do you have other ideas on using superannuation in Australia to help boost your retirement income? Share your tips in the comments section.  

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How to Make a Superannuation Contribution

It’s important to start saving for your retirement as early as possible. Personal super contributions are what you contribute to your superannuation from your net salary or after-tax income. If you’re employed, these contributions are added to your super alongside from the compulsory super contributions from your employer.

In this article, find out how to make a superannuation contribution:

  • Make sure you have your Tax File Number (TFN) as your super fund needs it to accept your personal super contributions.
  • Remember the date: June 30 every year. Your personal contributions must be in your super fund so you can receive a government co-contribution for that financial year.
  • You don’t have to make your personal contributions at one time, you can make payments throughout the financial year. You can use a superannuation calculator to give you estimates on the amount of contributions.
  • Most funds provide several options to make a payment including direct debit, through your bank account and BPAY.
  • You can also make super contributions regularly into your super account from your net salary. However, if the contributions are from your before-tax salary, these are called salary-sacrificed contributions.

Relying on employer contributions alone will not be sufficient to keep your lifestyle up once you stop working.

The good thing is, there are ways to boost your super:

  • You can make concessional super contributions. If you are employed, you can discuss with your employer a portion of your pre-tax salary that can serve as an extra contribution, also called a salary sacrifice.  Concessional super contributions are limited to $25,000 per financial year, which means that the total salary sacrifice contributions must not be more than $25,000 annually.
  • You can also make non-concessional super contributions. All you have to do is deposit money directly into your super. Unlike the salary sacrifice where payment is done before your salary is taxed, the non-concessional contributions involve money where tax is already paid.
  • If your salary is less than $51,813 per year before tax and you make super contributions after tax, you can boost your super with government co-contributions. For every $1 contribution, the government will contribute 50c, and the maximum co-contribution is $500 if your salary is less than $36,813.
  • If you are self-employed or have varying work patterns, you can claim tax deductions from your personal after-tax super contributions.
  • If your salary is $37,000 or less, you may be eligible to get a low income superannuation tax offset of up to $500 every year from the government. This is the 15% of the concessional contributions from you or your employer during the financial year.

Do you have other ideas on superannuation in Australia? Share your insights in the comments section.

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Splitting Superannuation Contributions

When you’re looking into your superannuation, you may come across the term splitting superannuation contributions. When you split your contributions, it means that you move or transfer some of the contributions that you’ve made to your super account to that of your spouse.

In this article, you can find out more about splitting superannuation contributions:

When can you apply to split your superannuation contributions?

While you can apply to split your contributions no matter what your age is, your spouse should be less than the preservation age that is applicable to him/her, or aged between the preservation age and 65 years. He/she must also not be retired.

You can apply to split your contributions in the financial year right after the year in which you made your contributions or the financial year when you made the contributions, but only if your whole benefit is being withdrawn before that financial year ends. It can be a transfer, a rollover, a lump sum benefit, or a combination of these.

What contributions can you split?

The amount that you can transfer to your spouse each financial year is affected by a number of factors. For instance, it depends on the amount and type of contributions that you made in the previous financial year. It is also affected by the contributions that you made in the current financial year. However, this will apply only if your entire benefit will be rolled over, transferred or withdrawn in that financial year.

You can split taxed contributions as well as untaxed employer contributions.

What are the benefits of splitting superannuation contributions?

When the younger spouse splits the concessional superannuation contributions with the older spouse, this will lead to a larger pool of funds for the older spouse when he/she becomes eligible to receive the pension and get the super benefits.

Splitting contributions is also beneficial in terms of tax, when one spouse has a higher income than their partner. For a couple who are between 55 and 59 years old, the spouse with a higher income can split the contributions with the spouse with a lower income who was a lower tax rate and therefore, the pension payments under his/her name will come with a lower tax liability.

It may also be helpful to use a superannuation calculator for estimates on how much you have and how much you need when you retire.

Do you have other ideas when it comes to splitting superannuation in Australia? You can share your insights in the comments section.

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Ways to Judge Your Super Fund’s Performance

Superannuation in Australia is a form of investment. Some believe that it is just a single asset but in reality, a super is composed of several asset classes where you’ll find your investment options. We’re talking about your hard-earned money, so it only makes sense to check your super’s performance. By knowing ways to judge your super fund’s performance, you’ll be able to assess and decide if you need to make some adjustments to ensure better returns.

The performance of your super changes every year. While it will grow for the long term, you may see low and/or negative returns. So how can you judge your super fund’s performance?

Here are some ways to judge your super fund’s performance:

  • Performance of your super can be hard to determine, but try to look for a reasonable one. For instance, there’s no use choosing the top performer for next year just by looking at the data from the previous year.
  • Check figures from the last five years. It’s not that useful to check the super’s performance from the last 12 months. This is a long-term investment, so it’s better to check the performance for a longer duration. Bear in mind that the performance of your super from the previous years will not guarantee the same performance in the coming years.
  • The performance of your super is affected by the investment options available as well as their risk profile. Also, it will have an impact to your final balance of your superannuation and how much your money will be upon retirement.
  • Use a superannuation calculator. This tool is commonly used to know how much money is needed for your super fund. Bear in mind, however, that this should only be treated as a guide. Since there are several factors that affect the performance of your super, the superannuation calculator can only provide estimated figures.
  • Compare similar existing investment options. For instance, make sure to compare similar funds, instead of comparing cash investment options with international shares. Look at where the fund is invested in. Don’t compare the performance in shares versus performance in cash and fixed interest.
  • Use the same period for each fund, or same start and finish dates. For instance, the performance of your fund for the last five years from January to January is not the same as the performance from April to April.

Do you have other ideas on how to judge your superannuation in Australia? Share your insights in the comments section.

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10 Facts About Your Superannuation Entitlement

A lot of people plan for their retirement as early as possible because in this way, time is on their side, meaning they have more years to save up and have a comfortable life upon retirement. In Australia, employers pay superannuation contributions on behalf of their employees to a super fund.

Here are other facts about your entitlement to superannuation in Australia:

  1. Your employer should make superannuation contributions that are the equivalent of 9.5 percent of your ordinary time earnings. This is the superannuation guarantee based on annual entitlement.
  2. You will be eligible for superannuation guarantee if you have a monthly income of at least $450.
  3. If you are under 18 years of age, you still need to have a monthly income of at least $450 and work at least 30 hours.
  4. Starting 2013/2014 financial year, individuals who are 70 years of age and older are eligible for superannuation guarantee.
  5. You should pay the superannuation guarantee at least every three months. Your employer must pay the super entitlement to your super fund at least every quarter. If this is not the case, you can file a complaint at the Australian Taxation Office.
  6. There’s a maximum contributions base for those who have a high income. Those who are earning a huge amount of money will have a cap or limit to their superannuation guarantee. For the 2017/2018 financial year, the super contributions are the equivalent of 9.5 percent of your ordinary time earnings, but only up to a yearly cap of $211,040.
  7. Understand your remuneration package. You should ask your employer if your salary includes your super, or if it is calculated after super.
  8. Know the salary sacrifice arrangements. When you’re starting with a new job, make sure to understand the salary sacrifice rules and negotiate carefully. You may end up with the employer cutting your superannuation guarantee because of your salary sacrifice arrangement.
  9. Self-employed individuals can still get superannuation guarantee.  You can receive contributions and still have your super contributions tax-deductible, when you’re self-employed for the 2017/2017 financial year.
  10. Contributions count towards the concessional cap. The superannuation contributions made by your employer count towards your concessional cap before tax.

Here are several things that you need to know about superannuation. You can calculate how much money you need upon retirement and how much should be added to your super fund on a regular basis by using a retirement calculator.

Do you have other ideas on superannuation in Australia? Share your insights in the comments section.

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A Step-by-Step Guide to Comparing Your Superannuation Fund

For most people, it is essential to start retirement planning as early as possible. This gives them leverage in terms of comparing different superannuation products, and that time is their ally in growing their funds. But with several aspects to look into, how do you compare super funds and choose the right one for you? Here’s a step-by-step guide:

Step 1: Know the various funds available

In general, if you’re an employee, you can join a super fund through your employer. But you can also do it as an individual. The advantage of being a member of a group is that the fees are lower. Also, your super may have more growth potential than if you join as an individual.

Step 2: Collect personal data

Know your current account balance, level of contributions made during the year, investment options and returns, all fees that you pay, as well as insurance cover. You can get this information from your annual member statement. You can also gain access to these details when you register on your super fund’s website. It may likewise help to use a superannuation calculator, though the results may only be used as your guide. 

Step 3: Check the insurance

Do you have insurance cover on your existing fund? If yes, then make sure if the other fund that you’re considering offers the same type of cover or not. Look into whether you can maintain your insurance cover and for what premiums.

Step 4: Look into investment options

It is important to look into investment options and their performance because at the end of the day, you want to invest in something that offers better growth potential. Check if the fund has a solid investment strategy that’s based on expert analysis, and that you can change options later on with little to zero cost.

Step 5: Know the fees involved

The fees that you need to pay will have an impact on your investment returns. While there are fees to be paid occasionally, be wary about ongoing fees that are being deducted from your fund on a yearly basis. In general, check out all fees that are deducted from your contributions.

Step 6: Seek professional advice

Managing your super fund is a serious matter. Know and understand how it works to get the most out of your super. It also pays to seek help from a qualified individual so you will better understand aspects such as the amount of contributions, type of insurance that you need, fees involved, as well as the investment option that suits your needs and preferences.

Got other ideas on superannuation calculator and retirement planning? Share your tips in the comments section.

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Different Types of Super Funds

How much do you need to live comfortably upon retirement? When it comes to planning for retirement, you can ask an expert for superannuation advice so you can better understand the process. You can also use a superannuation calculator to give you an idea of the amount you need to contribute regularly for your super fund.

Retirement planning can be done as early as possible. There is a wide selection of super funds to choose from, so don’t be tempted to get the first one that you’ll see. Each type has its own features, and knowing your options can make the selection process easier. Here are the different categories of super funds:

MySuper

If you’re employed and you haven’t chosen your own super fund, your employer will pay contributions to your MySuper. It offers lower fees options when it comes to single or life stage investments, and life insurance on an opt-out basis. MySuper also has simple features wherein you don’t have to pay for services that you don’t need.

Retail funds

Banks and investment companies operate retail funds which offer a lot of investment options.  These are normally accumulation funds which can range from low-cost or MySuper up to high cost.

Industry funds

These are usually low to mid-cost funds, though some offer MySuper accounts. Unlike retail funds, industry funds have a smaller number of investment options. Most of these are accumulation funds. However, there are several older funds that have defined benefit members.

Self-managed super funds

For those wanting to manage their own superannuation, they usually do this via a self-managed super fund (SMSF). It is regulated by the Australian Taxation Office. This private super fund can have up to four members who are all trustees and are in-charge of making sure that the SMSF complies with laws associated with it.

Public sector funds

These are designed for employees of the departments of the Federal and State government.  This super fund offers low fees and a modest range of investment options. Some also offer MySuper accounts. New members of public sector funds are in an accumulation fund, while long-term members have defined benefits.

Corporate funds

Employers run corporate funds which offer a range of investment choices. These are usually low to mid-cost funds. Most members are into accumulation funds, while the older corporate funds come with defined benefit members.

Got other ideas on superannuation in Australia? Share your tips on retirement planning in the comments section. 

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Is Self Managed Super Fund (SMSF) Right for You?

Even when you’re still young, planning for retirement as early as possible is important. This ensures that you’ll be financially secure after you retire. Some people want to manage their own retirement plan or superannuation. It is referred to as self managed super fund (SMSF). While there are many benefits of handling your own retirement fund, there are also several factors that you need to consider.

Is SMSF suitable for you? Here are some things to think about:

  • If you’re considering to control your super to get the most out of your money, be prepared to invest time and effort so you can properly manage your super. You can get assistance of course, but you’ll be in full control of your retirement plan.
  • You should have at least $300,000 for your self managed super fund. You also need to consider the ongoing costs associated with operating an SMSF. These include Australian Taxation Office (ATO) fees, investment fees, as well as annual tax return and audit. You can use a superannuation calculator to give you an idea on how much you need to have.
  • If you’re planning to go overseas for a longer period of time, make sure to seek professional advice. Follow the rules and regulations being implemented by the ATO when it comes to extended leave from Australia. Otherwise, you may have to pay large penalties.
  • Come up with an exit strategy. Since you’re in full control of your SMSF, you’re also in-charge of setting up an exit strategy in the event that you need to close your SMSF. Bear in mind that there are costs involved in closing your fund.
  • There are specialist support providers who can help you in managing your SMSF. Support services are available to assist you with regards to administration and compliance of your fund. Whenever you need someone along the way, you can likewise reach out to an independent auditor or accountant.

These are just some of the things to take into consideration when it comes to self managed super funds. Planning for retirement really does come with a lot of considerations. Take time to do some research and look at your superannuation options. You can also seek retirement advice from family members and friends so you can come up with a well-informed decision.

Got other ideas on self managed super fund and retirement planning in Australia? Share your insights on retirement plans in the comments section.

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10 Benefits of Superannuation that You Might not Know About

When it comes to retirement planning, you’ll most likely hear the term superannuation. Its purpose is to help people prepare for retirement and secure the future. Using a superannuation calculator can give you an idea of how much super you’ll have when you retire.

Without it, you’ll find it very hard to live comfortably once you retire. Aside from this, here are the other benefits of superannuation:

1. Lower Tax Rate on Contributions

Super is designed with a series of tax breaks to encourage contribution. You and your employer can set up a salary sacrifice agreement that involves exchanging the income tax rate with the lower 15% super contributions tax rate. There are different rules for low income earners and high income earners to be aware of.

2. Ability to Choose your Super Investment Options

If you are a member of a super fund you can generally specify what your risk appetite is for investment. You can decide on investment options such as Growth, Balanced, Conservative or Cash.

3. No tax upon retirement

There will be no tax on capital gains or income once your superannuation starts paying the allocated pension. If you retire before reaching 60 years old, the superannuation will handle the 15% tax of the assessable amount until you reach the age of 60.

4. Tax on Investment earnings

In general, money made through investments within a superannuation comes with a lower tax rate compared to those made outside of the superannuation. It’s usually taxed at a maximum rate of 15%. Capital gains longer than 12 months within the fund will be taxed at 10%. This can be further reduced by tax deductions or tax credits.

5. Investment in bigger assets

You and other superannuation members can pool your retirement savings so you can invest in bigger assets.

6. Less expensive insurance cover

Insurers can usually offer a more affordable deal when publicly offered superannuation gets insurance policies in bulk. Paying for insurance premiums is also more convenient since these can be automatically deducted from your superannuation account.

7. Continue the insurance cover

Many insurers have an option to keep your insurance cover even after leaving your employer. This is greatly beneficial for those who find it hard to get the same levels of insurance protection.

8. Co-contribution from the government

You can get a tax-free co-contribution or bonus top-up form the federal government if you make non-concessional contributions to your superannuation account.

9. Avoid insurance medical exam

There are large superannuation accounts that offer automatic cover for new members without undergoing a medical exam.

10. Death Benefit Nomination (DBN)

If you use a binding death benefit nomination, you can ensure that your money will go to the right people when you die.

Know other benefits of superannuation in Australia? Share your retirement planning or superannuation advice in the comments section.

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How to Make Sure You have Enough Retirement Money to Take Overseas Trips

After many years of working full-time, most, if not all, Australians look forward to retirement. It’s the time when people relax, go on a vacation, and spend time with loved ones. This is a time to do whatever it is that you want to do but have no time or even resources to do so while you’re still working.

Of course, your salary will stop coming in once you retire, so it’s really important to save money and plan for retirement to ensure a comfortable life. But how can you make sure that you have enough retirement money for things that you want to do such as overseas trips? Here are several things to consider when planning for retirement:

Know how much superannuation you’ll need

This serves as the main source of income for retirees. In retirement planning, consider your future lifestyle needs. For instance, taking a vacation overseas costs money. You also need to consider future costs such as medical expenses. Make sure to have a clear vision of what you want to do so you’ll know how much superannuation you would need to maintain your lifestyle.

Use a superannuation calculator

This can give you an estimate of how much super is enough to keep the lifestyle that you want.

Update your superannuation fund

If you think that your current funds may not be able to meet your desired target, you may want to update your superannuation by increasing your regular contributions and/or finding competitive rates. The higher the interest rate, the more money you’ll have when you retire.

Consider investment options

Superannuation is not the only financial source for when you retire. You can ensure that you have enough retirement money for overseas trips by having other investment products to increase your savings.

Create a budget

When you have a budget, you’ll know how much money you’ll need and allocate funds to what you want to do. Budgeting can give you peace of mind, not worrying about whether there’s enough money to enjoy retirement.

Retirement planning should be done as early as possible so you’ll have more time to increase your superannuation and savings in general. You may also want to seek superannuation advice from professionals to better guide you on what to do to ensure that you’ll have enough money for overseas vacations and other activities that you want to do upon retirement.

Do you know other tips when it comes to superannuation in Australia? Share your insights in the comments section.

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