Under 40? Your super still matters.
So, you’re under forty. Should you be thinking about your superannuation?
The answer is yes. Super is important no matter your age.
We’re facing a problem, the baby boomers (yes, our parents) have started retiring putting a strain on the age pension. The government has already raised the age at which you can apply for the pension from 65 to 67. I think we need to be prepared for it to go up again. My guess is that it will eventually be 70 years of age.
We need to be ready to live 30+ years in retirement. How will we pay for all of that? The government has a limited number of resources. Once the baby boomers have finished retiring we could have around 4 working people paying tax to support each retiree, as well as paying for hospitals, roads etc.
Basically, if you are under forty, you may not be able to rely on the age pension being easy to obtain
So, what can we do to prepare for your retirement?
Well, here are 3 ways that may boost your super.
1: Consolidate it into one account
Do you have lots of super accounts? You may be doubling up on fees. Many super funds charge fixed administration or member fees. If you hold more than one of these, you are likely to be doubling up. That money should be working to fund your retirement, not disappearing in unnecessary fees.
2: Make extra contributions
Right now your employer should be paying 10% of your income into your super account. That will eventually rise to 12% but this may still not be enough. There are options to add to this, and the bonus is, you receive a tax deduction. There are two ways to do this. Firstly, you can set up a salary sacrifice arrangement with your employer. This means you tell them how much extra you want them to pay into your super, and you don’t pay your marginal tax rate on this amount. Concessional super contributions are taxed at a maximum rate of 15% within the fund. If your marginal tax rate is higher than this, you benefit from the difference.
Secondly, you can make lump sum contributions into your super and claim a tax deduction. This can help if you get gifted a lump sum, a bonus etc, as you can claim a tax deduction on these amounts.
In both cases you need to stay under the concessional contribution limit of $27,500 pa (that is the combined total from your employer and your own concessional contributions).
3: Pay attention to it
Super is your money; you need to pay attention to it. Where is it invested? What is the strategy? Are your employer contributions actually getting paid? Taking some time to get advice and paying attention to your super could make a huge difference in the long run.
You’re never too young to think about your super and your retirement
Have a great day
Ben Graham-Nellor
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Ben Graham-Nellor is an advisor, coach, blogger and speaker who has worked in the financial services industry for over 15 years. He believes that by educating and advising people today, they can improve their tomorrow.
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