As part of your overall financial health, there’s no time like the present to get your Superannuation in order.
I recently read an article in the weekend paper featuring Dr Rand Low of the UQ Business School.
His top 10 tips on maximising your Superannuation (in my words) are:
1. Understand what your savings target is. You need to work out what income you can live on in retirement and multiply that by 25 (assuming an average rate of return of 4% – 4 x 25 = 100)- There is a good Superannuation calculator on www.moneysmart.com.au
2. Maximise Pre-Tax Contributions. In 2017/18 your contribution threshold is $25000 per year. Contributions save tax for you if your personal marginal rate of tax is more than the Superannuation tax rate of 15% and boost your Superannuation quicker
3. Consolidate Your Superannuation. If you have multiple accounts because of different jobs over time, it is smart to roll them into one account. This will help to minimise fees and charges. You can search for lost Super if you have a myGov account. And most retail Superannuation funds provide a free and easy service to consolidate your Superannuation holdings and to check for lost Superannuation as well.
4. Get Smarter (Financial Literacy). Commit to learning about different types of investment. Understand compounding, investing for the long term and being consistent with contributions. You can then commit small amounts across a range of investments and see the benefit over time.
Do not trust that your Superannuation will look after itself with a set and forget mentality.
5. Look at the Big Picture. Check medium and longer term performance of an investment as a truer guide.
6. Minimise Fees. You are ideally looking to maximise investment returns net of fees. Examine if there are lower fee options for your Superannuation investments or if you can negotiate a good deal
7. Understand Leverage (Borrowing). Leverage can accelerate gains. It can also magnify losses if done incorrectly. The risks of leverage are minimised if you buy high quality assets at a good price. You are expecting these gains to be more than the cost of servicing the debt.
8. Diversify Your Portfolio. Not all assets are designed equal. Asset classes perform differently each year. And having ‘all of your eggs in one basket’ can result in a ‘sink or swim’ result or missed opportunities.
9. Explore All Alternatives to Boost Income and Your Working Life. Ideally you are looking for jobs which are not physically gruelling but take advantage of your work experience. Working part time in retirement reduces the drain on your Superannuation and is good for physical and mental health
10. Consider Downsizing Your Home. To live in a smaller and more manageable home is tax effective as there is generally no tax on the sale of your home. Downsizing enables you to top up Superannuation. There are implications for those receiving an Age Pension.
If you want to chat Super and minimising your tax, please contact us.