Future proofing: What’s your superannuation strategy?

Your financial decisions today will affect your standard of living in the future. It’s important to have a regular review of your superannuation to ensure that you’re on track to a comfortable retirement. Here are the steps to take.

Start by assessing your current super situation, and how much income you are likely to have from super and the Age Pension when you retire. The government offers an online tool to help you calculate this.

Consider arranging an appointment with a financial planner. Investing in good advice may pay off multiple times in the long term. Remember that superannuation is a long-term strategy, not short-term speculation. You will need to take investment fluctuations in your stride.

Superannuation strategy

Consider salary sacrifice

Ask your employer about salary sacrifice. This is an arrangement where you agree to forgo part of your future wages in return for your employer providing benefits of a similar value, such as increased superannuation payments.

There are various benefits to this, but a key one is the ability to reduce your assessable income. Your extra super contributions are taxed in your fund at a maximum rate of 15 per cent, which is generally less than you would pay if the contributions were part of your taxable salary. So, you’re putting more into your super, and paying less tax.

So long as your super fund complies, the sacrificed amount isn’t considered a fringe benefit for tax purposes, so your employer isn’t liable for paying FBT on super contributions.

Bear in mind that you can’t sacrifice salary what you’ve already earned – it can only apply to future income. Therefore, if this is something you want to do, you need to start early.

Shop around

Fund management fees can vary significantly, so it’s always important to compare what you’re paying with the fees charged by other funds on the market. If you’re paying too much, look for a better deal. There are several sites that compare super funds, but they rate funds in different ways. Some rate them by fees, and others by investment performance and strategies.

If you have multiple funds, consider consolidating your super accounts where possible. This helps you avoid paying fees on more than one account and also losing track of your super. If you want to find any ‘lost super’ you can create a myGov account and ask the ATO to check for you.

Manage your own fund

Self-managed super funds (SMSFs) are an increasingly popular option for Australians. Nearly one in ten people now manages their own superannuation investments.

You do need extensive financial knowledge and skills as well as time to manage your own super. You’ll also need a sufficient amount in the fund to make the annual running costs worthwhile, and keep enough liquidity to pay tax and income payments when due.

With an SMSF you also need to regularly review your investment strategy to ensure it is performing and that the level of risk is suitable for your stage of life.

If you want to take a more active role in preparing for your retirement and your financial freedom, your super is the place to start. However, don’t rush in blindly. Take a careful and measured approach so you can build your savings and look forward to a comfortable retirement.

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

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