As financial advisers, we’re very aware that one of your key financial priorities throughout your working life is to save for the life that comes after that – your retirement.
If you finish working at age 65, longevity statistics suggests that, on average, you’ll have around 20 years to relax, enjoy yourself, and do all the things you didn’t have time for while you were working and raising your family.
Given that, it’s clear that maximising your super fund – the fund that will likely provide the bulk of the income you’ll live on in retirement – is something you should be looking to do.
One problem is that, while you’re working, you may well have pressing needs beyond saving for retirement, including repaying the mortgage and meeting the costs of your children’s education.
Here are seven ways you can boost the value of your super fund.
1. Regularly review your super fund(s)
Try to get into the regular routine of looking at your super annual statements when they arrive – or check online if that facility is available.
The sort of things you should be reviewing are:
- The fees that are being deducted
- The investment returns you’re getting from your funds
- The projection of the long-term returns.
Over time you’ll be able to check that you’re getting full value from your investments, and that you’re on track to meet your goals.
One word of caution, however, is not to check the value of your super too often. The nature of investments is that values can fluctuate, so you’ll want to avoid the temptation of tinkering.
2. Review your investment strategy
As part of your review process, you should check that your overriding investment strategy is still fit for purpose and will deliver what you expect it to.
The returns you get will depend on the level of risk you take and the period of time you’re invested.
In the long term, higher-risk investments will typically provide greater returns than low-risk options such as bonds and fixed interest investments. Over the shorter term, funds have less time to ride out periods of investment volatility.
Again, we believe that expert advice is essential, as mistakes can prove expensive.
3. Trace all your super funds
If you’re looking at your latest super valuation and thinking that there’s an appreciable gap between what it’s worth now and what you hope it’ll be worth in the future, a good first step is to check that you’re considering all your supers.
You can quickly check on the Australian Taxation Office (ATO) website for lost or unclaimed super funds.
Once you’ve found them, you should then put a simple spreadsheet together that lists all your super fund details including valuation, investment details and the scheme administrators.
4. Consider consolidating all your super funds into one arrangement
Once you’ve traced all your super funds, a possible next step is to consolidate them into a single arrangement.
Doing this will immediately make it easier to keep track of what you have. You may also be able to reduce the annual administration and investment charges you pay. Reducing these will mean that less is deducted from your fund, so you’re increasing the amount that can build up with investment growth.
Before deciding to consolidate, however, you should bear some factors in mind that could mean doing so isn’t the best step. These could include:
- Any life insurance as part of a super fund that you’d lose by consolidating
- Access to low-cost investment choices you may not get through a different super.
The decision to consolidate isn’t straightforward, and we’d always recommend you get expert financial advice.
5. Consider making voluntary contributions
You can give the value of your super fund a boost by making voluntary contributions to your fund, on top of the super guarantee contribution made by your employer.
Such contributions are made from your after-tax earnings, and you can claim a tax deduction on them through your annual tax return. You can currently contribute up to $27,500 each year.
The tax-efficient of such contributions means that, as well as boosting your super fund, they can form a valuable part of your holistic tax planning strategy.
For example, you could offset Capital Gains Tax (CGT) on any assets you’ve sold by making a voluntary contribution with the proceeds.
Likewise, you could make a voluntary contribution to your super from earnings to reduce your marginal rate of tax on the overall amount you earn in a tax year.
6. Use “salary sacrifice” to boost your super
A salary sacrifice arrangement means that you give up a proportion of your salary and your employer pays it into your super fund, in addition to your super guarantee.
Salary sacrifice results in potentially considerable tax savings for you. This is because all such contributions are taxed at the current “concessional” rate of 15% rather than at your marginal rate of tax, which could be substantially higher.
Be aware, however, that the maximum that can be contributed at the concessional rate to your super fund is $27,500 – and that includes all contributions made by your employer.
7. Make after-tax contributions
Although not as tax-efficient, making after-tax contributions can also help boost the value of your super fund.
As far as contributions go, there are no tax advantages. However, money invested in a super is taxed in a more advantageous way than other non-super investments. This means that more of your fund is allocated to investment rather than deducted in tax costs and charges.
Get in touch
If you have any queries about your super and how you could boost the value of your fund, please get in touch with us.
This article contains general advice only, which has been prepared without taking into account the objectives, financial situation or needs of any person. You should, therefore, consider the appropriateness of the information in light of your own objectives, financial situation or before acting on the information.”