October 19, 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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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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