According to the various surveys that have been done, 40% of Australians don't think that they will have enough money to retire on and all indications are that the number is on the rise. Also, only about 50% of people consult a financial planner about their super even though managing superannuation is not necessarily straight forward.
Circumstances change throughout life and various financial challenges surface at different times. Here are a few things to consider at each stage of life that will help you maximise your superannuation savings in preparation for retirement.
20s to 30s
It is quite common during your early working years to have multiple superannuation accounts, typically due to several changes in part-time work. You might think that the amounts in each account might not be very much, so therefore it is not worth worrying about. But while these multiple, small super funds do not attract contributions, fees just eat away at your money. In contrast, the accumulated effect of combining accounts and letting compound interest work over the next 40 years can be significant (Try the ASIC compound interest calculator). The best option is to consolidate all super funds into the one fund that receives your regular contributions.
When combining and comparing your various accounts, keep in mind termination fees, insurance policies, investment options, and ongoing service fees. You can consolidate your super through the myGov website.
40s to 50s
You may find yourself earning more than you’ve ever earned before but at the same time, you may be juggling a lot more living costs including a mortgage and supporting an active family.
If circumstances permit, consider making tax-effective voluntary contributions to your super fund. Spousal super contributions are an option if they earn a low or no income. You may be able to claim a tax offset for those contributions. There is also contribution splitting where you can elect for some of your super contributions to go into your spouse’s fund. We would be happy to advise you on the most effective options.
Retirement might still be a long way off but we recommend that you start thinking about your retirement plan. Review your superannuation insurance and beneficiary policies or, as we mentioned, consider voluntary super contributions.
By this stage you may have accumulated a substantial super balance. Maybe a SMSF is worth considering. It will give you greater control but there are issues to consider. You will need to weigh up the cost comparisons and it will come with compliance issues and costs. Even in the early stages of considering a SMSF, we suggest that you talk to Saward Dawson to discuss the options.
By this stage, if you haven't already decided, you should be determining when you wish to retire bit it doesn’t have to be as daunting or as finite as you may expect.
Consider a Transition to Retirement (TTR) income stream, where you can concurrently decrease your working hours while withdrawing money from your super once you reach your preservation age (which for most people will be 60 but if you were born earlier than 30 June 1964, it may be slightly earlier).
As might be expected, how you can access your super and how you will be taxed is regulated so please ask Saward Dawson about your situation. You may be eligible to apply for a government age pension or withdraw a tax-free lump sum from your super.