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You’ve heard about super from friends, the media, your employers, and financial institutions. But how much super do we need? How do we boost our super savings? What are the current super tax benefits? Check out the points below for more details and other essential points:
How Much Super Do You Need?
It’s a common myth that you need to have $1 million in super to retire. So, how much money do you need to retire? The short answer is it varies. In fact, according to MoneySmart, the average 65-year old couple will need $640,000 in super to see them through for the rest of their lives.
You’ll generally need less than a dual-income couple if you’re single. On average, you’ll need $545,000 in super to retire.
The amount of money you need also depends on where you live and whether you have a mortgage. For example, your living expenses will likely be higher if you own an apartment in Sydney compared to a house in Hobart.
You may also need more money if you plan to retire in another country where you are not entitled to access their social security system, and you need to pay for your own out of pocket expenses that are typically subsidised by the Australian government.
How Can You Boost Your Retirement Savings?
There are some simple things you can do to boost your super.
1. The Benefits of Compound Interest in Super
Compound interest is one of the cornerstones of investing. Compounding means you receive interest on both your principal investment and your interest. In other words, you receive interest, on top of your interest, on top of your interest, and on it goes!
Super is designed to keep the contributions made by you and your employer plus all your investment earnings confined away and working hard for the duration of your career. But it doesn’t end there. If you transfer your retirement balance into a super pension account, your investments continue to earn and grow throughout your retirement years helping you to fund your retirement lifestyle.
2. Make Extra Super Contributions and Get the Tax Benefits
Even paying small regular amounts into super can make a big difference in the long-term thanks to compound interest (see above!) and you can potentially get the added bonus of reducing the amount of tax you have to pay. Two type of contributions you can make into super include:
- Salary sacrifice: you can ask your payroll to pay part of your pre-tax income into your super account. There is a limit to how much salary you can choose to contribute but you will generally pay less tax by reducing your marginal tax rate.
- After-tax personal contributions: you can also contribute some of your after-tax pay into your super account as personal contribution and claim a deduction for personal super contributions with the ATO as long as you are eligible.
3. Take Advantage of Government Incentives
The Australian Government has incentives in place to help people save for retirement. If you are a low-income earner, the government will match a certain percentage of your contributions under the Super Co-contribution Scheme. These incentives can add up – the more you can accumulate, the better!
Alternatively, if you’re aged 65 or over and are looking to boost your retirement savings, you may be eligible to make a tax-free contribution to your super of up to $300,000 using the proceeds from the sale of your main residence under the Downsizer Contribution Scheme.
4. Combine Your Super If You Change Employers
When you change employers, you are entitled to bring your super with you to your new employment. Rather than holding multiple super accounts and paying multiple account fees, assess which account is more advantageous for your circumstances and combine your funds into the best account. It’s important to note in some cases you may lose particular benefits if you leave an employer-sponsored fund or you could lose insurance cover by closing a super account, so make sure to do your homework! We recommend you seek professional assistance to help you determine which super fund is best for you.
Remember that the amount of money you’ll need in super depends on many factors. It’s not just how much money you need to live through retirement; it’s also a matter of your current lifestyle, where you’re planning to retire, and what you’re planning to do.
At Newcastle Financial Planning Group, we are passionate about doing things a little differently. Many financial advisers look at your income and assets and then tell you what you can achieve. Our team of specialist financial advisers take time to understand your needs and goals before tailoring our advice, delivering the best possible outcome for you based on your needs. If you’re looking for retirement financial advice in Newcastle, we’ve got you covered. Get in touch with us today to explore your options over a complimentary first meeting.
DISCLAIMER: The views expressed in this publication are solely those of the author; they are not reflective or indicative of RI Advice Group’s position and are not to be attributed to RI Advice Group. They cannot be reproduced in any form without the express written consent of the author. This information (including taxation) is general in nature and does not consider your individual circumstances or needs. Do not act until you seek professional advice. Newcastle Financial Planning Group, Central Coast Financial Planning Group, Sydney Wealth Advisers, Coastal Advice Port Macquarie and Coastal Advice Ballina Byron are subsidiaries of Coastal Advice Group Pty Ltd which is a Corporate Authorised Representative of RI Advice Group Pty Ltd, ABN 23 001 774 125 AFSL 238429.