We all look forward to retirement – that rewarding period in life when you finally get to kick back and relax, or focus on the side hustles
that have long been on the backburner. Your superannuation thankfully helps with this, ensuring you’ve got the financial support necessary to keep you afloat upon leaving the workforce.
Proper management and investment in these funds are thus necessary to enjoy your peace of mind as a retiree. Below, we break down some of the best ways to grow your superannuation for a stable, secure future.
What is superannuation?
Also known as one’s “super”, your superannuation is money set aside during your time in employment, which can then help serve your financial needs upon retirement. Employees who start earning $450
or more a month are entitled to a 10%
employer contribution to their super account, also known as the “Superannuation Guarantee”.
However, you can also choose to add more money to your super fund through the various options available on the market, each offering their own investment, tax, and insurance benefits.
What are some tips to boost your superannuation?
- Examine your fund options.
- Consider making voluntary contributions.
- Consider super boosts for low-income earners.
- Take investment risks.
- Consolidate your super.
1. Examine your fund options.
Investing in the right fund is critical to growing your superannuation and meeting your retirement goals for the long term. In an interview
with ABC Australia, financial adviser Jacie Taylor states the two most crucial factors to consider when switching funds: fees and asset class (or what you choose to invest in).
According to her research, the average Australian pays only about 1.1%
in super fees – so canvassing within this ballpark may give you the best return in value. It can also help to contact your fund and request a breakdown of all potential fees, including membership, investment, and administration fees. Of course, considering your investment goals is also important – whether this be shares, bonds, properties, or infrastructure; ensuring they align with the investment opportunities your fund offers.
To help you shop around for better funds, the Australian government now offers an online tool called YourSuper
(accessible through ATO’s online services), helping you compare between the options available. Be sure to review your chosen fund on occasion, ensuring it continues to meet your retirement needs and provides you good value for money.
2. Consider making voluntary contributions.
Also known as “salary sacrificing”, you may wish to direct a part of your pre-tax salary to your super account. This saves you in taxes along with growing your super, as you’ll end up paying tax on your “sacrificed” contribution at a rate of 15%
(or 30% for higher income earners) – lower than the marginal tax rate you’d otherwise be on if you earn over $45,000
Individuals can “sacrifice” up to $27,500
a year, which includes the 10% guaranteed super contributions made by your employer. It’s important, however, to ensure you’re contributing money that you’re comfortable with not using in the coming years.
Another method involves contributing a lump sum to your super and then claiming a tax deduction. You’ll be taxed for 15%
of your contributed amount, but when claiming a deduction upon doing your tax return
, you may end up with a bigger refund. Using this approach requires notifying your super fund of your intent to claim a deduction (typically through an ATO-provided form
) and ensuring you meet the eligibility requirements listed.
3. Consider super boosts for low-income earners.
If you’re a low to middle-income earner and make personal contributions to your super fund, you may be eligible for government “co-contributions”. This involves the government putting in 50 cents for every dollar
that you contribute to your super, allowing them to boost your retirement savings by up to a maximum of $500
each financial year.
This method additionally doesn’t require an application process. The ATO determines your eligibility upon filing your tax return, and if your super fund has your tax file number (TFN) attached to it, they provide their co-contributions automatically. However, those who use this will no longer be eligible for tax deduction claims on their personal super contributions.
Spouses who make contributions to their partner’s super fund may also be able to get a rebate of 18%,
provided they’re a low-income earner making less than $40,000 a year. These rebates can go up to a maximum of $540.
According to financial adviser Kate McCallum, the “magic” amount is $3,000
for spouse contributions. Should the individual earn under $37,000 a year, they are then eligible for the full $540 rebate.
4. Take investment risks.
Though this advice depends on your attitude to risk, your financial situation, and the time you have available to invest – taking on “riskier” investments is often recommended. In the long run, higher-risk ventures (such as shares and property) will often lead to greater monetary returns, compared to more “conservative” investments such as bonds and cash.
Experts recommend younger individuals to take greater investment risks, as you’ll typically be able to ride out market fluctuations and volatility at an early stage. Those closer to retirement,
however, may lean into safer options, as market crashes and financial dips may be harder to recover from later in the game.
5. Consolidate your super.
Finally, consider consolidating your super funds into one single account. If you’ve worked multiple jobs over the years (or have multiple sources of income
), you’re likely managing more than one super account. This often leads to greater annual fees, admin work, and unnecessary challenges when refining your overall investment strategy.
Consolidation can be as easy as contacting your chosen super fund and requesting their assistance.
This, however, may come with extra withdrawal or exit fees, and you may lose the insurance or tax benefits your previous accounts provided. It’s thus important to do your research and weigh out the options that work best for your long-term retirement goals.
Additionally, be sure to claim any lost super from various jobs over the years. The ATO typically holds any unclaimed super money on your behalf, which can easily be found through their online services
or by phoning their super search line on 13 28 65.
How to calculate superannuation
A typical employee’s superannuation can be calculated by multiplying their gross salary by 10% - the compulsory amount their employer pays into their super fund. Overtime (unless rostered into your ordinary hours of work) and worker expenses are typically not included in this calculation, though some bonuses and allowances are.
For example, if you earn an annual salary of $60,000 and are paid $5,000 as a bonus, then your superannuation is $6,500 ($65,000 x 10%).
Building your skills for well-paying jobs (or side gigs for additional income) is recommended to boost your earnings and, in turn, your super. Upskilled currently offers a wide variety of courses across Australia’s most in-demand industries – from community services to IT – providing you with the professional development needed throughout your time in the workforce.
This article should not be taken as expert financial advice. Please consult a financial specialist for further advice on your circumstances.