- July 27, 2017
- Posted by: Ethica Private Wealth
- Category: Blog
With the upcoming super changes expected to take place July 1, 2017, you could be one of many Australians tempted not to put your focus on your super or your retirement. For example, two of the major changes are a cut in the contributions caps in both before and after-tax contributions, and a new limit on how much super can be shifted into pension accounts.
While none of us can control government changes to investment rules, nor can we control what happens in the investment market, there are quite a few ways you can still save during times of major changes to super. Do some housekeeping and get started on these 12 great ways to get the most out of your super.
Give Your TFN to Your Super Fund
In order to make sure that both your employer’s contributions or your concessional contributions are not hit with a high tax amount of 49% and 47% from July 1, 2017 instead of the normal 15% tax, make sure your TFN has been given to your super fund. Also, if you do not submit this to your fund before July 1 and you earn less than $37,000, than you will not be eligible for the super tax refund.
Additionally, missing this important detail could cause you to miss out on other beneficial aspects of putting your retirement savings into a super fund.
Don’t Lose Touch with all of Your Superfunds
Whether you have one super fund or five, don’t lose touch with any of them. If you know you have money in some of them but haven’t done much with them lately, the government actually has the ability to take those funds within a 12-month period and send them over to the ATO until you claim your funds. Your money could get eaten up by the government’s cash coffers. If and when you do claim your money, you will not receive any investment earnings. That being said, ATO doesn’t charge you any fees for holding your funds.
Combine Super Accounts to Save on Fees
An interesting statistic that few people know about is that there are approximately 3 superannuation accounts for every Australian of working age. This means is that there are more accounts than there are people working! Some people have more than 3 super accounts. Every super account is being charged investment and administration fees. Why not take the funds from all of those accounts put them into one so you can save money on fees?
Since super funds typically charge a flat fee for administration fees, you could be paying double, triple, or quadruple the amount of fees, of course depending on how many accounts you currently have. Combining them will help you save more money, so whatever it takes to switch everything to one, could be well worth it in the long run.
Double-check that Your Employer is Making Correct Amount of Contributions for You
Most people earning at least $450 a month at their job, is receiving superannuation contributions from their employer at a rate of 9.5% of what they are currently earning. Since 9.5% can mean something different, depending on whether your super earnings are ‘plus super’ or ‘including super,’ you want to double-check that they are paying your contributions at least on a quarterly basis into the fund that you had originally chosen.
The rates have changed over the past 4 years which means it is up to you to make sure that your employer has been contributing the correct amount into the right fund. Employers make mistakes, so you could be losing some of your contributions due to an administrative error.
Check How Much Life Insurance Cover Is in Your Fund
This can be tricky to figure out on your own due to the varying factors that determine the amount of cover in your super, such as age, gender, occupation, and your current health. If you do not choose your fund, then your employer will make that choice for you and must pay the minimum amount of cover. Do your housekeeping and make sure you know how much cover you have.
Get Real about How Much Money You Need to Retire
Get real about what you feel you need to retire the way you want to retire. Once you know that amount, then you can start taking more proactive steps to get there. Having specific goals in mind makes it so much easier to reach them or at least get as close to them as possible. Consider whether you want a modest or comfortable retirement and work from there.
Another thing you may want to do is to set a retirement date and just aim for that, even if that date changes. Why not look forward to spending your days relaxing on the beach and not having to answer to anyone but yourself? This will boost your incentive to work hard and save as much as you can so you can reach your goal as fast as possible.
Make Sure Your Fund Delivers Well
Every superannuation fund is different, which is why you want to make sure that it delivers what you well. For example, is it competitive? Does it deliver comparable investment returns? Will it provide you with the retirement lifestyle you want? Is the insurance cost-effective? These are questions you should be asking and if your chosen fund falls short of some or, all of these things, then it may be time to look into switching to a fund that has everything you want and need.
Review Investment Options and Monitor Investment Returns
In order to make sure you are getting the most out of your fund, you want to make sure you monitor it on a regular basis to make sure the fund is the right investment option for you. It’s best to check this over a long period of time and then compare against other funds. Also, if you did not choose your fund, then your super funds will be sitting in the default investment account.
Currently, around 80% of superannuation funds are invested using the default option, which is typically a more balanced option. This method could be slowing down the amount of money your fund earns, however, it is best to check with an advisor to see what is best before making any changes to it. Taking high risks may not be what you want right now either, but then again, you could be missing out on increasing the amount of your fund as well.
Make Sure You’ve Nominated Your Beneficiaries
There are two common ways to leave your superannuation benefits to your loved ones. The first way is to leave it to anyone that is dependent as defined under the super laws. The second way is to leave your benefits to your estate in which case, the monies from your super will be paid out to anyone that is part of your estate. It is important to regularly review this and make adjustments where necessary. And, as we all know super laws are constantly changing so it is important to be on top those changes because in the event that something does happen to you, you want to make sure that monies are allocated to the correct people and places.
Rapidly Boost Your Final Retirement Benefit with Before-Tax Contributions
By making regular concessional, before-tax contributions, you could give your final retirement benefit the rapid boost it needs. You can also do this through after-tax contributions. No matter which way you go, both types of contributions have an annual cap. It’s important that you understand how this works. Either way, even if you max it out your annual contributions, you could be better off during your retirement years, but of course this is just an idea and may not be a feasible option for you. It is worth checking into should your financial situation change or improve in any way and you would like put more money into your fund.
See If You Are Eligible for a Co-Contribution
You must satisfy certain conditions in order to receive this benefit, however, if you qualify for this, you could receive up to $500 per year. Even though this is half what it used to be, it could still be worth it in the long run. For example, let’s say you qualify for the full amount and you’re 50 years old and planning to retire at 65. That could be an extra $7,500 in your fund that didn’t come from your pocket and of course this number could change, but this just gives you an idea of how to “beef up” your fund a little more because when it comes to retirement, every little extra counts!
Learn to Appreciate the Generous Tax Advantages Super Has to Offer
The point of a superannuation fund is to save on taxes. The fund is taxed at a much lower rate to encourage more people to save their money and lock it in for retirement. You can literally save thousands of dollars when saving with super, plus by knowing more about how your fund can help you save even more on taxes, you could really take advantage of the many incentives your fund has to offer.
The above-mentioned list provides some great ideas to help take advantage of the many benefits your super fund provides. It was designed to help you get the most out of your retirement planning and saving, so why not take the time to really get familiar with how it can help you? If you find the changes in the laws and regulations intimidating, then take the time to find a financial planner to help you make sure your fund is on the right track.