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Add $1 Million to your final super payout? It is possible!

For many Australians, the idea of saving an extra million dollars in super seems like an impossible dream. And yet it doesn't have to be. A few simple, proven strategies can have an enormous impact on your eventual super payout, especially if you start early. Even if you're closer to retirement, you can make a big difference by acting now.

The secret is to begin as soon as possible, take advantage of super's tax benefits and - most importantly - avoid wasting money on fees. Here's a case study to show how it can work.

Case study - How Archie could add an extra million dollars to the final super payout.

Super payout

Consider two investors - we'll call them Archie and Matilda. They're both 35, earn $100,000 a year, and have $150,000 in super savings invested in a higher growth option designed to maximise returns. We'll also assume their salaries both rise at 3% a year and they each plan to retire at 65.

What makes Archie and Matilda different is that Archie has decided to take control of his super with a self-managed super fund (SMSF). Not only has that reduced his fees, it has also encouraged him to top up his super with a tax-effective salary sacrifice contribution of $6,000 every year.

Archie also plans to take advantage of a strategy called Transition to Retirement when he turns 60, taking a tax-free pension income stream from his SMSF while salary sacrificing even more into super.

How much difference could those strategies make?

Strategies Archie Matilda
Establish an SMSF Yes No
Reduce fees Yes
A fixed fee of p.a.
Based on ESUPERFUND's low-cost fee structure
plus ATO Levy of p.a.
(both fees increasing with inflation at 3% p.a.)
No
1.2% p.a.
(Based on Retail Fund Average as reported here)
Maximise Returns Assume 7% Annual Return Rate Assume 7% Annual Return Rate
Salary Sacrifice $6,000 every year (increasing with inflation at 3% p.a.) No Salary Sacrifice
Commence Pension Yes
Start Transition to Retirement pension at 60
No
open quote

Amazingly, Archie could end up with an extra $1 million in super at retirement, simply by opening an SMSF and actively building his super.

What gave Archie his million dollar advantage - and how can you follow in his footsteps? While different strategies will suit different investors, here are two key principles to keep in mind:

  •  
     
    Successful DIY investors take a personal interest in their super, actively working to build their retirement savings.
  •  
     
    The less you pay in fees, the more you have to invest. That's why an SMSF with a low-cost fee structure could be a winning strategy, depending on your situation.

Find out more

If you think an SMSF might be for you, read more about the benefits of running your own fund.

Before you start

An SMSF can be a great vehicle to take back control of your Super but an SMSF may not be right for everyone. We have conveniently summarised other factors to consider when contemplating setting up an SMSF here. We also assist you in understanding what is involved in the ongoing management of your SMSF via our Free SMSF Learning Centre here.

If you want to learn more about SMSFs, download an information pack today.

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