Smart.Happy.Money 8: Under 40? Super still matters!
So, you’re under forty. Should you be thinking about your superannuation? The answer is yes.
I’m also under forty, and I think it is very important for us all.
We’re facing a problem, the baby boomers (yes, your parents) have started retiring and that puts a strain on the age pension. The government has already raised the age at which you can apply for the pension from 65 to 67 and I think we need to be prepared for it to go up again. My guess is that it will eventually be 70 years of age.
We need to be prepared to live 30+ years in retirement. How will we pay for all of that? The government has a limited amount of resources. Once the baby boomers have finished retiring we could have 3 or 4 working people paying tax to support each retiree, as well as paying for hospitals, roads etc.
If you are under forty, I wouldn’t rely on the age pension being easy to obtain.
So, what can we do to boost our retirement savings?
Well, here are 3 ways to boost your super.
1: Consolidate it into one account
Do you have lots of super accounts? You may be doubling up on fee’s. Many super funds charge fixed admin or member fee’s. If you hold more than one of these, then you are doubling up. That money should be working to your retirement, not disappearing in unnecessary fees.
2: Make extra contributions
Right now, your employer should be paying 9.5% of your income into your super account, that will eventually rise to 12%. This isn’t enough. You have options to add to this and you can receive a tax deduction. There are 2 ways. Firstly, you can set up a salary sacrifice arrangement with your employer. This means that you can tell them how much extra you want them to pay to super, let’s say $100 per week. You don’t pay your marginal tax rate on this amount.
Secondly; you can make lump sums into your super and claim a tax deduction. This helps if you get a lump sum or a bonus, you can claim a tax deduction on these amounts.
In both cases you need to stay under the concessional contribution limit of $25,000 pa (that is your employer and your own concessional contributions)
3: Pay attention to it
Super is your money, you need to pay attention to it. Where’s it invested? What is the strategy? Are your employer contributions actually getting paid? Taking some time to get advice and pay attention to your super can make a huge difference.
You’re never too young to think about your super and your retirement.
Ben Graham-Nellor is an advisor, coach, blogger and speaker who has worked in the financial services industry for over 15 years.
BGN Financial Management Pty Ltd is a Corporate Authorised Representative 468796 of Professional Investment Services Pty Ltd AFSL 234951 ABN 11 074 608 558 www.centrepointalliance.com.au
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