If you’re in your 50s, you’re on the home stretch towards your retirement and hopefully you’ve built a good amount of super savings along the way. So now is also a great time to start thinking about your new life. That’s ‘life’ as in lifestyle. All those things you can do when work doesn’t take up so much of your time. We’re not talking big expensive trips (although there might be one or two of those), but everyday stuff like daytime movies, learning a new skill, taking long drives, eating lunch on the coast. Because, after all, what’s a weekend when you’re no longer on the 9-to-5 treadmill?
But let’s not get ahead of ourselves. Retirement is probably a few years off yet, and besides, you retire when you decide. If at all. Many people work well into their 70s.
For some, if they haven’t already, their 60th birthday is often a trigger to plan more specifically for life after work. This big-zero birthday is also a good time to get extra-deep and ‘up close and personal’ with your super. This may help you see where you’re at with your super savings or figure out if you want to make more contributions to supercharge these savings during the coming years. There are always options and choices, no matter what your balance looks like right now.
Here are a couple of things you might consider when reviewing your super and assessing if you’re on track to support your retirement lifestyle. We’re not going to throw everything at you today (your dinner will get cold or your commute to work will be over before we’ve even begun), but we are going to mention two of the niftiest little moves you can start considering now.
Super salary sacrifice
Yes, just as it sounds, you do have to sacrifice a bit of your salary each pay period. Each year you can take advantage of concessional (pre-tax) contributions – they’re capped at $25K per financial year. If you’re able and want to take advantage of the contribution cap this financial year, get in before 30 June 2020. Keep in mind that the funds have to reach your super account by 30 June 2020, so make sure you’re factoring in any processing timeframes between your financial institution or employer sending the contribution amount(s) to your super fund. Ah, we thought you might like that! Of course, you can do this at any age, but if your living costs have eased (kids have moved out and food, electricity and internet bills have halved – just saying) then you might be able to contribute more to your super. It’s always good to regularly review your finances and make an assessment about your own situation at different stages of your life. For more info on the contribution cap limits, head to the ATO.
Speaking of the end of the financial year, now is also a great time to check with your pay office to see what your current tax rate is. If you’re on the highest marginal income tax rate of 45 per cent, salary sacrificing for super could save you a motsa, but there are benefits for most taxpayers. That’s because your super contributions are taxed at 15 per cent compared with the marginal income tax rates that range from 19 per cent to 45 per cent. Good to keep in mind that it’s only tax-effective if you stick to the $25K (per financial year) cap we talked about.
You already know the other side benefit to this too: out of sight is out of mind. If you sacrifice your salary straight to your super then it can’t get lost in your general spending. Instead, that money can go straight to your future and avoid being eaten up by the present.
Yes, there are different options. Lots of options. Your investment options, like most of the language around superannuation, are really just about what risks you are comfortable with and how much risk you are willing to take. And when we say ‘risk’, we mean the investment risk of your money going backwards or your investment returns being lower than expected. The investment risk will vary depending on the type of assets you want to invest in, how long you’re planning to hold your funds in that investment and how you want to manage that investment. Once you’ve figured this out, you can make your selection on the option (or options) that aligns with your risk level.
And of course, the other side of risk is reward.
If you’re willing to take a higher risk, then you could get a higher reward. The options chosen by most moderate to higher-risk takers are usually described as ‘growth’ and ‘high growth’ investments.
Then there are more conservative options, where the risk of losing money is lower and, you guessed it, the returns are also relatively lower.
It’s no surprise that in between these two risk levels are lots of other, well, in-between options, including the most common ones, which are usually called ‘balanced’.
Okay, now for just a little bit of nitty-gritty. Traditionally, some younger people are more willing to take more risk because they have more years to make up any losses. The closer to retirement they get, some people decide to take less risk because they have fewer years before they start to live off their super. If you haven’t done so already, getting advice about your investment options can help give you a much clearer picture about your personal attitude towards risk and the potential investment returns. Being able to make an informed decision about your level of risk and selecting the investment option (or options) that suit you can have an important impact on your super balance at retirement.
Things to consider for your retirement savings:
- Salary sacrificing to boost your super savings could reduce your tax bill. Have a crack at a super savings calculator to see how adding a little could potentially be a lot.
- People on the top marginal tax rates often save the most from salary sacrificing, but all tax brackets can benefit.
- Check your investment option and decide if you’re comfortable with the risk it includes.
- Ask for a breakdown of each investment option. Different funds have different sets of assets and risk levels, despite using similar names.
- Your superannuation fund can put you in touch with a financial adviser who can help you make these decisions. You can also contact the Financial Planning Association for a referral.
- Those over 65 could take advantage of downsizing their home by contributing up to $300,000 from the proceeds of the sale1
Did you know we can help you get started? As a Living Super member, you’ll get a complimentary session of single-issue advice with a qualified Money Coach from Link Advice (worth $340). Call an ING super specialist on 133 464 between 8am and 8pm Monday to Friday (Sydney time) to find out more.
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. Financial advice is provided by Link Advice Pty Ltd ABN 36 105 811 836, AFSL 258145.
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