A healthy super balance is key to being able to live the life you desire in retirement. But for many Aussies, retirement is a long way off, and it is difficult to know whether your super is keeping up.
Figures from The Association of Superannuation Funds of Australia’s (ASFA) October 2017 report ‘Superannuation account balances by age and gender’ show that many Gen Xers won’t have enough super savings for an independent life once they cease working, and will need to rely on the government’s age pension.
Although Gen Xers may have been putting money into super for most or all of their working life, the compulsory employer super payments only recently increased to 9.5 per cent in 2014, after a slow start in the 1990s. This means many Gen Xers are behind where they need to be if they want a comfortable retirement.
For example, a 45-year-old should have $211,123 to be on track and a 49-year-old should have $260,676. But the average balance for a 45–49-year-old is actually $114,616.
How to get on top of your super
The good news is that as a Gen Xer, a concerted effort now – in what are likely the highest-paying years of your career – will help to boost your super balance at retirement and ensure you a healthy income stream. Even small changes over the next 15 to 30 years can make a big difference by the time you leave work and you can access your super.
Here are five ways to make your super work for you.
1. Work out how much super you’ll have at retirement
There are several online calculators that can help you estimate your super balance on retirement. Once you understand the gap between your projected balance and what you’ll need to retire comfortably, you can put a plan in place.
2. Make voluntary contributions
Although your employer is required to make regular SG contributions into your super account, if you make extra super contributions from your pre-tax salary (salary sacrifice contributions) into your super account, you may reduce your annual bill. Concessional (before-tax) contributions are taxed at a rate of 15%, which for many people is less than what they pay on their salary and wages.
3. Consolidate your super funds
If you have more than one super account, consolidating them will help you save on fees, benefit from the investment earnings of a larger pool of money, and make it easier to keep track of your balance.
4. Review the level of risk of your investment choice
Have you assessed the risk level of your super investment options? Many people opt for safer approaches such as ‘balanced’ or ‘conservative’ investment options, but depending on your appetite for risk and general market conditions, you could consider switching your investment strategy from ‘balanced’ to ‘growth’. Speak to your financial adviser first to make sure you select the most appropriate investments for your circumstances.
5. Check your insurance levels
Now is definitely the time to check the insurance cover that comes with your super to ensure it’s appropriate for your personal circumstances. If you have a big mortgage or a growing family, it’s important to check you have sufficient insurance cover to look after the people that depend on you if your die or cannot work for a long period.
By paying the premiums for death, total and permanent disability (TPD) and income protection insurance from the money in your super account, it can be a cost-effective way to get insurance protection if your family budget is stretched.