I'm 40 - 50 and need some Superannuation advice
Kathryn is an Architect and Tim is a Senior Construction Manager, who have both been working in their professions since they graduated from university over 20 years ago. When Kathryn was recently promoted, they took a moment to consider their investment situation and wondered if they could be savvier about what they do with their super. Like most people, their super contributions had just been going into superannuation funds opened by their various employers over the years.
The couple has two school aged children, so education expenses continue to be an important expenditure. Recently, they’ve seen their parents retire with less-than-optimal retirement plans. So, they would like some advice on how to make the most of this part of their career while they are earning a good income.
When you reach your 40’s and 50’s, superannuation becomes much more important, as you have fewer years to work and contribute to your retirement fund.
Knowing how to boost your superannuation funds before you finish working is key to being able to live a comfortable lifestyle when you retire.
There are some strategies available that your Financial Advisor at Super Equity can talk to you about. Here are our top tips on how to boost your super, and in turn, enjoy more money in retirement.
Here are a few things to consider before you start...
Salary sacrificing means you are directing a portion of your gross (pre-tax) salary towards your super fund. These pre-tax payments are called concessional contributions. Concessional contributions are taxed at 15%, once they reach your super fund.
The Superannuation Guarantee (SG) contribution is paid by your employer directly to your super fund, at the standard rate of 9.5% of your earnings before tax. A salary sacrifice is a payment you choose to make in addition to this SG contribution.
The immediate tax benefits are in reducing your taxable income and paying only 15% tax on the funds going into your super fund. (Note: Salary sacrifice payment on incomes greater than $250,000 p.a. will be taxed at a higher rate)
You can contribute up to $25,000 of pre-taxed income into your fund annually. This includes both your employer’s super guarantee (SG) contributions and your own salary sacrifice payments. Paying more than $25,000 into your super fund in a financial year will attract a higher rate of tax.
If your employer does not support salary sacrifice, you can make after-tax payments directly into your superfund and claim the tax benefit at tax time.
Note: Salary sacrificing is only beneficial if you earn over $37,000.
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In addition to salary sacrificing, you can make direct payments into your super. Payments made from your after-tax income are called non-concessional contributions and are not taxed when they reach your super fund.
The cap on non-concessional contributions is currently $100,000 per financial year. If you exceed the contributions cap in a financial year, you will be required to pay extra tax when you lodge your tax return. Having said that, you are also able to utilise the 3 year bring forward rule which allows you to contribute $300,000 in one year – but then you can’t make any further non-concessional contributions for another 3 years.
If you are in a position of being able to make voluntary contributions to your superannuation fund, talk to us at Super Equity to make sure your investment structure is geared towards your growth goals.
Have you ever looked into how much your superannuation fund is earning each year, and if your fund is growing at a good rate?
Often people have no idea about the investment mix of their fund (e.g. how their funds are invested), or how much risk is involved. Depending on what type of investment mix you have, your funds could be invested in any combination of cash, shares, property and fixed interest.
If you have a balanced investment, you may have 30% of your funds invested in cash and fixed interest – this means there is lower risk but also lower returns. A balanced fund is most often the default option when joining a super fund, which means you could be missing out on maximising your returns.
If retirement is still at least 10 years away, you might consider a higher risk fund which will earn higher returns over a long period of time. While you may encounter losses in some years, over time your fund is more than likely to earn more than a balanced mix.
Educate yourself about where your Superannuation is invested, how much risk is involved and if your fund is performing. Talk to a Super Equity Financial Advisor about your investment options, and how to make the most from your super fund.
To give your Superannuation the best opportunity for growth, it should all be in one fund. This will also save you money on fees and insurances.
Let us help you consolidate your funds into one.
Entering retirement with no debts can reduce financial stress. It is a good idea to talk to a financial advisor about the benefits of paying off debts vs paying additional money into your superfund.
If you are self-employed, you can also make a contribution to your superannuation. This may be tax-deductible. The same contribution limitations that apply to individuals will apply. If you are self-employed you should seek advice to clarify the options available to you. Call us at Super Equity to discuss a strategy for your superannuation that will ensure you achieve your goals for retirement.
For more information on boosting your Superannuation in your 40s and 50s, and for Superannuation Advice and Strategy, contact Super Equity today.
NOTE: Any advice or information in this article is of a general nature only and has not taken into account your personal circumstances, needs or objectives therefore, before acting on the advice, you should consider its appropriateness to you, having regard to your objectives, financial situation or needs.