Sub category: Superannuation
7 January 2016

How to maximise your retirement income

Our superannuation is one of our greatest financial assets; helping us save for retirement and maintain a comfortable lifestyle in our later years.

It’s a view shared by the majority of Australians, according to the latest ING DIRECT/Financial Services Council Your Super Future report (2015), which found that 81% of us view super as essential in providing a comfortable retirement.

Conversely, the report also found that many Australians still regard superannuation as a ‘top up’ to the age pension, and consider the age pension to be their primary source of income once they leave the paid workforce for good.

While many retirees are currently eligible for the age pension, it only provides for fairly basic financial needs in retirement. So, it’s important to take control of your retirement planning early on in order to ensure a comfortable standard of living in the future.

Optimize your superannuation  

Your super fund is one of the most straightforward and potentially tax-efficient ways to save for retirement, so take some simple steps to ensure it is working for you:

  • If you’ve had a number of employers, you may have acquired multiple super funds; potentially paying multiple sets of fees and multiple insurance premiums too. Annual super fees may sometimes appear negligible, but due to the power of compounding they can hinder growth of your super balance over time. So, once you have a fund which offers you value for money and the features you need, consolidate your super into that one fund and use the money you save on fees to grow your super balance instead.
  • Making your own contributions, in addition to the mandatory 9.5% contributions made by your employer, could help your super grow faster. If you’re considering additional contributions, salary sacrificing may be a tax efficient way to go about it. By salary sacrificing, you are making deposits into your super fund directly from your pre-tax pay, and the potentially concessional tax rate on these pre-tax contributions could mean there is more money invested towards your retirement.  If your annual income falls below the upper threshold of $50,454 you may be eligible to take advantage of the government co-contribution. If you earn $37,000 a year and your employer is making before-tax contributions into your super, you could also be eligible for the government’s Low Income Super Contribution.

Consider other sources of post-retirement income

  • Super is a particularly efficient retirement savings vehicle, but you might consider other investments outside of super such as property, or cash deposits, to diversify your portfolio, spread the risk across multiple investment vehicles and your access to income. Having a diverse portfolio could help to protect your wealth, as if investments in one asset class are underperforming at a particular point in time, your investments in another class may help to mitigate any shortfall. You can also check what options your super fund offers you to help you diversify your investments portfolio within super.
  • Selling your family home or a reverse mortgage could release equity which you can use to fund your lifestyle. If you no longer need the space you have available, you might like to think about downsizing to a place which better suits your phase in life and gives you access to cash which you can invest in other ways – such as in shares, super or cash term deposits. Downsizing your home or a reverse mortgage could incur additional costs and affect your eligibility for potential government benefits.
  • Delaying retirement while you continue to work past the retirement threshold could extend the life of your super while you continue making contributions meaning it could last longer when you do finally access it. Another option is to take part-time employment while drawing an income from a Transition to Retirement account. This could give you the best of both worlds: you reduce your working hours, and top up your income with your super, while still making contributions to your super in a tax-efficient way which leaves room for you to grow your balance further.

 

Getting help

Wealth building for retirement may feel less daunting once you take control of your super. Try our online retirement calculator to see whether your super will have you on track for a comfortable retirement, and explore different ways to boost your super.

Also, consider speaking to a financial adviser (133 464) for tailored solutions relevant to your risk profile, stage in life and personal circumstances. They can help you with the options available and advise which may be best for you.

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 Home and Contents 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.

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