Chris McKnightAn investment in superannuation is an investment in your retirement and the quality of life you want to enjoy during these years. Of course the earlier you start considering how to invest your money, the easier it will be to make informed financial decisions as life goes on.
At each stage of your life, you can expect your priorities to shift. When you are in your younger years, you are focused on marriage, kids and mortgages. As you get older, the hope is you will have significantly reduced your mortgage, have fewer day-to-day expenses and can focus on investing money into superannuation.
While you are young, take this opportunity to find a super fund that is right for you. Not just for now, but also for the future. This includes looking at investment performance, fees and other services on offer.
20’s, 30’s and 40’s
For low-income earners, growing super may include government co-contributions; personal (after-tax) contributions that are matched by the government to a maximum amount of $500. The co-contribution amount depends on your income and how much you contribute.
For those earning more money during these years, it might be worth making concessional (before-tax) contributions to your super account which can help reduce your income tax bill, depending on your level of income. Another useful way to contribute to your super is through salary sacrifice, where you and your employer agree to a certain percentage being paid directly to your super account, above what they already have to pay. If the amount you sacrifice each week is enough to bring you down into a lower tax bracket, this means that may be a tax effective strategy to boost your retirement savings.
If your spouse is earning little or no income, it might be beneficial to make a spouse contribution to their super account, and possibly be eligible to claim a tax offset of up to $540.
Early 50’s
This is the stage in your life when your kids have most likely finished school and your mortgage is close to being paid off, if not already paid off. Now is the time to think about whether you have the capacity to make additional voluntary contributions to your super account.
It is also worth taking a look at your insurance cover at this age as you might need to ensure the coverage meets your current needs i.e. remains relevant and appropriately costed if funded via super.
Late 50’s to early 60’s
Now is the time to start pouring money into your superannuation fund, being considerate of the contributions cap. Transferring your money into a super fund instead of the bank means that it’s likely being invested to grow your money at a greater rate than a standard interest rate.
Once you have reached preservation age and have retired, you can access your super benefits tax effectively. Keep in mind that your superannuation may have to last you upwards of 20 years if you retire at 60 so you want to ensure that you have enough to live the lifestyle you have worked a lifetime for.