10 tips to help determine if you’re on track to enjoy retirement
There’s no better way to start a new year than to kick start a financial fitness program – and we can show you how. Below you will find 10 Financial Fitness Tips that could make a big difference in helping you make the most of your money.
Tip 1. Start Early
Thanks to the power of compound interest, the sooner you begin to save, the further ahead you will be than someone who starts later and contributes more. There is no substitute for saving early!
Tom started saving $100 per month at age 25 and continued saving for ten years. By age 65, his investment would have grown to $200,000.
In contrast, Nick started saving $100 per month at age 35 and continued to save for thirty years. But his investment would grow to only $150,000.
*Based on an 8% return compounded monthly.
Tip 2. Do the math
The level of income you will need in retirement depends on the lifestyle you lead. As a general rule of thumb, you will need an amount of around 70% of your pre-retirement income. Calculating the amount you need in retirement will give you a clear target to start planning effectively.
Tip 3. Find your lost super
The Australian Taxation Office (ATO) estimates around half of all Australian workers have lost some super. There’s a whopping $8.2 billion in 5.4 million unclaimed super accounts - and some of it could be yours.
It’s easy to be reunited with your lost super. Simply visit the ATO’s website and use their online search tool SuperSeeker. Alternatively, call the ATO’s Superannuation Infoline on 13 10 20 to have a search conducted on your behalf. Make sure you have your tax file number (TFN) handy as you will need this and your date of birth in order to conduct a search.
Tip 4. Keep your super in one place
Do you have multiple super accounts? Having more than one super account is not only confusing, it may also make it hard for you to see just how much super you’ve got.
Move your super into one account to:
See your super picture more clearly – you will know exactly how much super you have, and can rest assured that none of your super is lost, so you‘re not missing out on any of your hard-earned savings.
Control your position – by watching one balance, it will be easier to manage your investment strategy and reach your retirement goals.
Pay a reduced number of fees – one super fund means one set of fees, not several, which may make a significant difference to your retirement savings over time.
Save time – with just one statement, you’ll spend less time managing multiple accounts, so you can concentrate on watching your super’s progress.
To consolidate your super accounts, download our Consolidation Form.
Please note: Before consolidating, you should make sure you understand any impact the rollover may have regarding any insurance benefits or exit fees associated with leaving another super fund
Tip 5. Get up to $1,500 p.a. from the Government
If you earn less than $58,000 a year, you could be eligible for a Government co-contribution. This means the Government will contribute up to one dollar and fifty cents to a maximum of $1,500 for every after-tax dollar you contribute to your super, as shown in the table below.
How high could your goverment bonus be?
Your personal after-tax contribution
$1,000
$800
$500
$200
Your
income p.a.
Here’s what your government co-contribution would be:
$28,000
or less
$1,500
$1,200
$750
$300
$30,000
$1,400
$1,200
$750
$300
$32,000
$1,300
$1,200
$750
$300
$34,000
$1,200
$1,200
$750
$300
$36,000
$1,100
$1,100
$750
$300
$38,000
$1,000
$1,000
$750
$300
$40,000
$900
$900
$750
$300
$42,000
$800
$800
$750
$300
$44,000
$700
$700
$700
$300
$46,000
$600
$600
$600
$300
$48,000
$500
$500
$500
$300
$50,000
$400
$400
$400
$300
$52,000
$300
$300
$300
$300
$54,000
$200
$200
$200
$200
$56,000
$100
$100
$100
$100
$58,000
$0
$0
$0
$0
How does it work?
The ATO automatically assesses whether you are eligible for a co-contribution based on your tax return together with information supplied by Russell SuperSolution each October.
If you are eligible, the Government pays the co-contribution directly into your Russell SuperSolution account and it will show up on your next annual benefit statement.
Your after-tax contribution must be received by us on or before 30 June in order for you to be eligible for the government co-contribution in the following financial year.
If you earn less than $58,000 and are currently making contributions to super via salary sacrifice, you might like to consider making up to $1,000 of your contribution from after-tax money to ensure you qualify for the co-contribution.
To make an additional after-tax contribution, simply download Your Additional Contributions Form.
You should consider how long you have to invest, and your comfort level with risk, when choosing the investment strategy that is right for you.
All investments contain a level of risk that you may lose part of the original money you contribute. Often when choosing investments, the more risky the option, the greater the potential return. Likewise, safer investment choices may offer a lower potential return.
It is important to select a strategy that reflects your comfort level with risk, making sure that it will also help you achieve your retirement goals. Find out more about the investment strategy you have chosen for your superannuation to see if it is the right fit.
Tip 7. Maximise tax advantages
Many Australians plan to rely on the 9% super payment from their employer to fund their retirement. Most have not considered if this will be enough to maintain the lifestyle they lead.
Contributing even a small additional amount into your super account could make a big difference to the way your retirement investment grows. The tax benefits offered through super, including the proposed changes to remove tax on super payouts received after age 60, make super a great way to save for the future.
Understanding the benefits and implications of both before- and after-tax contributions can have a substantial impact on your super over time. With this in mind, you may want to investigate if making additional ‘before-tax’ contributions via salary sacrifice is a beneficial way to improve your tax situation and saving opportunities. Making voluntary ‘after-tax’ contributions can, in many cases, qualify you for the government’s co-contribution scheme (see Tip 5) which will further assist your saving efforts.
It is important to determine whether you and your family are protected if the unexpected happens.
To do this, start by writing an insurance plan to work out the value of your assets and their replacement costs. Then, work out your income protection needs. List your commitments – outstanding debts or regular payments such as car or housing loans – and how much you would need to cover those if you faced losing your income over one or two years. What about if you faced permanent disablement?
You would need a lump sum that would be equivalent to your future income stream. Deduct from that the sale of any assets like savings or property and your existing superannuation benefits. The gap remaining should be covered by insurance.
Your current superannuation policy may offer insurance cover such as Death, Total and Permanent Disablement and Income Protection.
To find out more about the insurance options available to you through Russell SuperSolution, call our Helpline on 1800 555 667.
Tip 9. Stay on track
Setting and following a budget can help you track where your money is going, allowing you to manage your money more efficiently. Visit the Government’s Understanding Money Website for access to useful tools and information to help you improve your financial literacy and take control of your finances.
In addition to following a budget, you should review your investment goals and strategies regularly to make sure you are on track to reach your financial goals.
Tip 10. Seek Financial Advice
Discussing your personal financial situation with a professional can be beneficial in helping you make the most of your money.
As a member of Russell SuperSolution, you have access to the Russell Adviser Referral Program. Russell offers referrals to a small number of licensed or appropriately authourised Financial Advisers who we believe are best placed to provide full financial advice to our members. The affiliated advisers are not employees of Russell and are not compensated by Russell in any way. For more information on the Adviser Referral Program call our Helpline on 1800 555 667.
