If you’ve already hit your thirties or forties, chances are you’re in your peak super power years. Just to be clear, we’re not talking X-ray vision, leaping over tall buildings or avenging all the wrong in the world. But we are talking high stakes. Very high stakes – your money for your retirement. (And maybe even a little invisible force-field, but more on that later.)
If you’re an elder millennial, or in Gen X or Gen Y (which roughly means you’re in your mid-30s to 50s), then you’ve probably got a swag of stuff going on in your life right now. Experience shows us these are not just the peak superannuation saving years, but they’re also the peak years for big life events. And when we say big, we mean huge, including buying homes, partnering up, having children, advancing careers, upgrading the car, renovating and, hate to be boring but, well, ‘settling down’.
So there might be lots of things competing for your dollars, which is why getting your super pathway sorted now could be one of the best ways to put your super powers to good use.
We’ve got plenty of super tips to help make the road to your retirement possibly a little smoother. But first, let’s take a look at where you’re at right now.
Assuming your superannuation fund allows you to review your current balance online, log on to your super fund account and check out your balance. Knowing this is ground zero and the starting point for potentially supercharging your retirement.
Most super funds have online calculators that estimate how much money you may have when it finally comes time to quit work for good. Each calculator uses in-built assumptions about you and your investments, contributions, investment returns, inflation and tax. So, drill down for a closer look and make sure the calculator settings are a good match for your income and situation.
And while you’re drilling down, it’s also a great time to play around. Maybe pump up the deposit rate through extra contributions; shorten your work life to see if early retirement is an option; or change your investment choice to see if taking a different level of risk is worth the potential projected investment return.
As an example, using Moneysmart’s Superannuation Calculator (and based on all the assumptions ASIC has inbuilt into that calculator), by adding as little as $25 a week, someone who’s 35 could have an extra $50K and someone who’s 40 could have an extra $40K when they retire at 67.1 Head to Moneysmart’s Superannuation calculator to have a play with your own figures and see how much you could possibly boost your retirement. You’ll thank you that you did.
Now that you know where you’re at and where you could possibly be, it’s time to fine-tune those powers with a quick look at that invisible force-field we mentioned earlier.
A mid-career, mid-family, peak-super-powers life means you’re busy. Really busy. Too busy living your life to have to worry about what it could mean for you and your family if you had to stop working. That’s where the force-field comes in. Insurance is about providing a way to support your family and possibly financially maintaining the lifestyle you have grown accustomed to, if something were to happen to you. There are different types of insurance available within superannuation funds, covering death, total permanent disablement, income protection and more. Just what type of insurance and how much insurance cover you may need usually depends on what event you want protection for. It could be to replace lost income if you were to become ill and couldn’t work. Or if the unthinkable were to happen, it could be to help your family pay off those big-ticket items we mentioned earlier, like your home or car loans. That cover could act as an invisible force-field for the lifestyle you and your love ones have today and in the future. Zap!
Okay, so you’ve got your super power knowledge, your retirement savings goal and the invisible force-field. It’s time to lay out some trigger points to concentrate your super powers on, especially as we head towards the end of the financial year.
- Heard of salary sacrificing? Each year you can take advantage of the concessional (pre-tax) contributions – it’s capped at $25K for the financial year ending 30 June 2021. After that, it increases to $27.5K p.a. for the financial year 2021/22. If you’re able and want to take advantage of the cap, you’ll need to get your concessional contributions in before 30 June of the relevant year. That means, for example, with the concessional contribution cap of $25k for the financial year 2020/21, your concessional contributions need to reach your super account no later than 30 June 2021. So factor in any processing timeframes between your financial institution and employer sending the contribution amount(s) to your super fund. For more info on the concessional contribution cap limits, head to the ATO. Remember though, once you put the money into your super, it’s not readily accessible again. You’d need to fulfil the “conditions of release” of your super fund, and early withdrawals could attract tax.2
- Can you afford to make any extra contributions from after-tax money?
- Earning up to $54,837 p.a. for the 20/21 financial year? You may also be entitled to a government co-contribution of up to $500 each. The amount of the government super co-contribution will depend on a person’s income (inclusive of employer super) and the amount of additional super contributions the person makes. Check out the ATO website for more info and eligibility. The ATO also has a co-contribution calculator.
- If you make a contribution to your spouse’s super fund, you may also be able to get a tax-offset for this amount. Find out if you’re eligible here.
If you need assistance with your superannuation, consider speaking to a financial adviser.
Did you know we can help you get started? Call an ING super specialist on 133 464 between 8am and 8pm Monday to Friday (Sydney time) to find out more.
- Using the Moneysmart super calculation and with assumption based on: 35-year-old and 40-year-old examples both with an annual $78K of salary (before tax and super), retiring at 67, an existing super balance of $80K balance, employer superannuation rate at 9.5% at the start but will increase by 0.5% from 1 July 2021 until the superannuation guarantee rate reaches and stays at 12% from 1 July 2025 onwards, making additional concessional contributions of $25 a week. It is assumed there are no withdrawals made from the superannuation account and the employer and voluntary contributions will increase with inflation; also the total contributions are before tax contribution and do not exceed the concessional contribution cap, with the tax on these before tax contributions set at 15%. Based on ASIC’s default parameters which include but are not limited to an admin fee of $74 p.a., no contribution fees, indirect costs ratio of 0%, insurance premium of $214 p.a. (which will increase with inflation each year) and default investment option (with return rate of 7.5% p.a., tax on earnings at 7% p.a. and investment fees at 0.85% p.a.). All figures are rounded (to nearest thousand) and in today’s dollars adjusting for inflation at 2.5% p.a. and additional rise in living standards at 1.5% p.a. These examples are for illustration purposes only and are not guaranteed. Actual outcomes may differ. Investments may go up or down. All ASIC’s assumptions on its calculator are available on its website.
- With all contributions, the funds can only be accessed if you met the superannuation release requirements. Therefore if you make a withdrawal from your super account prior to retirement age and the withdrawal is from the concessional contributions (like employer contributions, salary sacrifice or voluntary concessional contributions), this will be taxable at the time the withdrawal is made. There may also be fees incurred when withdrawals are made and other conditions or requirement. You should review the terms and conditions of your superannuation account to ensure you understand all the implications of making contributions, withdrawals, the fees and costs, plus any relevant conditions and requirements.
The information is current as at publication. Any advice on this website does not take into account your objectives, financial situation or needs and you should consider whether it is appropriate for you. ING Living Super (which is part of the ING Superannuation Fund ABN 13 355 603 448) is issued by Diversa Trustees Limited ABN 49 006 421 638, AFSL 235153 RSE L0000635. The insurance cover offered by ING Living Super is provided by Metlife Insurance Limited ABN 75 004 274 882, AFSL 238096.
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The information is current as at publication. Any advice on this website does not take into account your objectives, financial situation or needs and you should consider whether it is appropriate for you. Deposit products, savings products, credit card and home loan products are issued by ING, a business name of ING Bank (Australia) Limited ABN 24 000 893 292, AFSL and Australian Credit Licence 229823. ING Living Super (which is part of the ING Superannuation Fund ABN 13 355 603 448) is issued by Diversa Trustees Limited ABN 49 006 421 638, AFSL 235153 RSE L0000635. The insurance cover offered by ING Living Super is provided by Metlife Insurance Limited ABN 75 004 274 882, AFSL 238096. ING Insurance is issued by Auto & General Insurance Company Limited (AGIC) ABN 42 111 586 353 AFSL Licence No 285571 as insurer. It is distributed by Auto & General Services Pty Ltd (AGS) ABN 61 003 617 909 AFSL 241411 and by ING as an Authorised Representative AR 1247634 of AGS. All applications for credit are subject to ING's credit approval criteria, and fees and charges apply. You should consider the relevant Product Disclosure Statement, Terms and Conditions, Fees and Limits Schedule, Financial Services Guide, Key Facts Sheet and Credit Guide available at ing.com.au when deciding whether to acquire, or to continue to hold, a product. Before interacting with us via our social media platforms, please take a minute to familiarise yourself with our Social Media User Terms https://www.ing.com.au/pdf/Social_Media_User_Terms.pdf.