How healthy is your super?

Superannuation is your savings for retirement, but are you making the most of the opportunities available so that you can build up enough in your super in time for your retirement?

Something to consider

While the cost of living continues to rise at a fast pace, taking the necessary steps to be financially prepared for your retirement is vital.

The national figures for the Retirement Standard (December 2009 quarter) outlined in the table below show the alarming difference between a modest lifestyle and a comfortable lifestyle compared to the Age Pension.

Assumes you own your home.
*Source: Westpac ASFA Retirement Standard, December Quarter 2009.

Boost your super

It’s important to understand that ultimately your super strategy will have a great impact on your retirement savings. Making the most of the opportunities available to you now can boost your super savings and help set you up for a comfortable and stress-free retirement. A little extra now could make a big difference later.

Salary Sacrifice

As the saying goes, if you can’t see it you won’t miss it.

A salary sacrifice strategy involves having part of your pre-tax salary paid into your superannuation fund by your employer rather than you receiving it as income. This strategy not only increases your pre-tax contributions to super, but reduces the amount of tax you pay; you benefit from only 15% contributions tax rather than your marginal rate of tax.

If your income is on the cusp of the tax thresholds, implementing a salary sacrifice strategy could also drop you down into the lower tax bracket, meaning you will pay even less in tax.

A salary sacrifice strategy may be an attractive option to reduce your tax and boost your superannuation in preparation for a more comfortable retirement.

When choosing this strategy, however, you need to remember that there are limits; pre-tax contributions to super are limited to $25,000 per person per annum (or $50,000 for those 50 years old and over) and this includes your nine per cent Superannuation Guarantee contributions. Remember too that it is super money, so you won’t be able to access the money until you retire, on or after the age of 55. So, why not ask your employer for more details.

Government’s Super Co-contribution

If you earn more than $35,000 a year, superannuation is the most tax-effective environment in which to grow your wealth. Although the Government has reduced the amounts that can be contributed to superannuation, the limits are still generous.

By making personal (or after tax) contributions to your super you could qualify for the Government’s Super Co-contribution. If your salary (assessable income and any fringe benefits) is less than $61,920 and you contribute up to $1,000 the Government’s Super Co-contribution could add an extra $1,000 to your super each year.

If you are self-employed

The Co-contribution is also available to self-employed Australians. To be eligible, you must make a personal contribution without claiming a tax deduction for it. The Tax Office will work out your Co-contribution from information on your tax return and details of contributions provided by your super fund.

You must earn at least 10 per cent of your total income from employment, running a business or a combination of both.

Consolidating your super

If you have changed jobs over your working life, it’s likely that you have more than one super fund. If that’s the case, you are most likely paying more than one set of fees, eroding your super savings.

Consolidating your funds will save you from paying multiple fees and charges. And, you’ll only have one super account to keep a track of! Before consolidating, check with the fund you’re leaving about any fees that might be charged for moving your money.

If you have lost track of your super, the ATO’s Super Seeker can help you find it, simply by using your tax file number, full name and date of birth. Visit www.ato.gov.au/super or call their automated telephone service on 13 28 65.

Having the right strategy

In Australia, we have an ageing population, that is, we are living longer and as a result will have more years in retirement which means we need more savings. Take the time to visit a financial planner and create a strategy that will help you make the most of the options available to you.

A Bridges financial planner will help you with the right super strategy, ensuring it suits your risk profile and your timeframe.

To find out more about the financial issues that affect your generation, Bridges have created a ‘Taking care of MY generation’ guide. Logon to www.bridges.com.au to view an eGuide or call Macarthur Credit Union to order a printed copy.

For more information on Bridges’ services or to arrange a complimentary, obligation-free initial consultation with a Bridges financial planner near you, please call Macarthur Credit Union on 1300 622 278 and start making the most of your money now.

Bridges Financial Services Pty Limited (Bridges). ASX Participant. AFSL No 240837. This is general advice only and does not take into account your objectives, financial situation and needs. Before acting on this advice, you should consult a financial planner. In referring members to Bridges, Macarthur Credit Union does not accept responsibility for any acts, omissions or advice of Bridges and its authorised representatives.