Lindy Walker Insurance and Wealth Manager
Many Australians look forward to their retirement – it’s a time to dedicate yourself to leisure, hobbies and experiences that were out of reach when you were working full time.
Of course this requires money, and building a nest egg that will comfortably fund 20 to 30 years of retirement can be daunting. With the right (positive!) attitude and a little pre-planning, just about everyone can put away enough to allow them to enjoy retirement.
Here are a few of my simple tips to help you maximise your superannuation.
Keep track of your super accounts
It’s estimated the average Australian entering the job market today is likely to have around 10 career or job changes in their lifetime. With career changes often come super fund changes.
The Australian Tax Office estimates around half of all Australians have unclaimed super as a result of changing funds at some point in their lives.
Multiple accounts also mean multiple fund managers charging account-keeping fees.
Over your working life, fees and charges add up and could have a serious impact on your balance. Whenever you change jobs it’s a good idea to roll over any unclaimed superannuation immediately into your new fund. This will consolidate your savings and minimise the amount of fees you have to pay.
The ATO provides a free and simple service that uses your tax file number to track down any unclaimed superannuation on your behalf, so there’s no excuse for leaving your hard earned super behind.
Shopping around will save you money
Speaking of fees, it's important to check what you're paying your superannuation fund in fees and charges. Depending on your fund, these could be administration fees, insurance fees, adviser fees or even withdrawal fees that you don’t want or need.
There's no point forking out more than you have to. Even a small reduction in annual fees, say one per cent, can add tens of thousands of dollars to your nest egg over the long term. Taking the time to shop around can ensure you get the best deal, as greater industry competition has created a raft of no-frills funds offering substantially lower-fees.
Saving the compulsory 9.5 per cent of your income is a great first step to future-proofing your retirement. But as the 2015 Intergenerational Report acknowledges, average life expectancy is on the rise along with the cost of living. Compulsory deposits alone are unlikely to allow you save enough to fund the kind of lifestyle you want in retirement.
As the federal government grapples with increasing the compulsory rate, it's a good idea to top up your balance by making voluntary contributions when you can. A regular savings plan is a great way to build towards retirement.
It pays to sacrifice
It’s also worth considering talking to your employer about salary sacrificing.
Salary sacrifice works by reducing your income tax and at the same time boosting your super balance. You ask your employer to put a portion of your pre-tax salary straight into your super account and the maximum tax you'll pay on that contribution is 15 per cent, far less than your marginal income tax rate, meaning more of your income can be invested.
Furthermore, the salary put into super does not count as assessable income, so you'll make a saving on your annual tax bill.
Don’t wait: supercharge your super today
The biggest roadblock to a comfortable retirement is believing you have plenty of time to grow your superannuation. It only takes a little bit of effort now, but ensuring you have plan in place today means you could have tens and even hundreds of thousands of dollars extra when you retire.