Worried you won’t have enough super for retirement? We show you ways to get in control of your nest egg.
Rising costs of living, lower returns on some investment classes and longer working lives, combined with the fact our retirements are extending as we are living longer, mean that many of us are concerned that we won’t have enough superannuation for our retirement.
However, there are things you can do to make sure your dollars go the distance.
How much is enough?
Your lifestyle, health and ultimately your life span will dictate how much superannuation will be enough. However, there is research from ASFA that estimates the lump sum needed to support a comfortable lifestyle for a couple is currently around $59,971 ($43,665 for a single person), assuming you’re receiving a partial Age Pension.
Right now the basic Age Pension covers around 27 per cent of an average male weekly income, and is the reason why around 15 per cent of aged pensioners live under the poverty line. This means your super is vital.
Retirement calculators exist to help you predict your needs based on cost of living in various locations. Statistics show the average Australian is expected to live another 20 odd years if they are currently 65, so there are many years of retirement living you need to save for, no matter how old you are right now.
Currently, you can access your superannuation from 55 years old and the age pension from 65 years old (this is expected to increase even further as the government changes eligibility requirements for the pension). Your access to superannuation and pensions is regulated according to when you were born and your gender; online calculators can confirm your own situation.
Maximise what you already have
The golden rule is that it’s never too early – or too late – to start planning for retirement. Don’t put it off, because there are always things you can do to maximise your existing superannuation.
You can shop around and choose your superannuation investments wisely to maximise returns. Your superannuation strategy will depend on your stage of life, as your appetite for risk may change depending on how close to retirement you are.
Depending on your superannuation balance, your financial knowledge and your appetite for risk, a self-managed super fund (SMSF) can also offer several ways to maximise your returns on your nest egg.
While a managed superannuation fund can offer some choice of investment, one of the advantages of an SMSF is the variety of asset classes on offer. Shares, cash and property are three of the most popular asset classes for SMSFs, but other, less common choices include investing in other listed securities or managed funds, bonds, warrants, metals and other exotic investments.
SMSFs typically offer various tax benefits as well compared to most managed superannuation funds.
For instance, SMSFs allow members to increase their superannuation balance by making asset contributions (also known as in specie contributions) instead of cash. These kinds of contributions can have tax benefits in addition to giving you a bigger pool of resources to invest.
An SMSF also allows you to pool your super with a spouse, and offers the option of adding your children as trustees.
Boost your nest egg
Your employer is legally bound to make contributions to your superannuation fund of choice for as long as you work, at 9.5 per cent of your salary. The easiest way to boost your superannuation is by making additional, voluntary contributions; this process is known as salary sacrificing. There are tax advantages to doing this but you’ll need to weigh up how much you can afford to sacrifice, and what the impact on your retirement could be over the longer term.
Another thing you can do is to use a transition to retirement strategy (TRAP). Rather than stopping work as soon as you reach retirement age, transitioning to retirement via part-time work can offer positive lifestyle benefits as well as financial advantages. Semi-retirement can let you earn an income, which means you may not have to draw on your superannuation nest egg as early, and you could even continue making contributions to your super, depending on how your salary and living costs align.
Other than your own home, your superannuation will likely be your biggest financial asset, as well as your main source of income in retirement. You don’t want to struggle, so it can pay to seek professional advice to make sure your financial strategy is sound, and to put you on the right track for a long, happy retirement.
If you want to learn more about SMSFs, download an .
If you’re ready to establish an SMSF, you can apply now with ESUPERFUND.