Want to see your super grow faster? Here’s how you can — by choosing what happens to compulsory contributions from your employer.
Make the super payments from your employer go further by choosing an investment strategy that suits your stage of life and retirement goals. Boost your super by salary sacrificing part of your income to supplement your employer contributions. By rolling over all your super into one account, you can save on fees and maximise your savings.
Putting money into your super can be a great way to secure your future, and in Australia, we’re lucky to have a system that helps us grow our retirement savings through compulsory contributions from our employers. These are known as superannuation guarantee (SG) payments.
Even though SG payments are your employer’s responsibility, that doesn’t mean you should ‘set and forget’ your super. If you leave all the decisions to your employer and your super provider, you may not get the greatest benefit from these compulsory contributions. That’s why it’s worth taking a proactive approach towards growing your nest egg. Here are three things you can do today to make your SG payments from your employer work harder for you in the long run.
Step 1: Consolidate your super
Have you got all your super in one place? If you’ve changed jobs, different employers might have made your SG payments to different funds over the years. This means you could have ‘lost super’ in accounts you’ve forgotten about. Before you switch, make sure you understand what this means for any personal insurance you hold through your super. You should also check if you’ll be charged any fees for leaving your current fund. We would always recommend seeking the assistance of a financial adviser before consolidating your super funds.
If your super is in multiple funds, you also have to pay separate administration fees to each fund, which eats into your retirement savings. On the other hand, if you roll over all your super into a single fund, you’ll not only save on fees but you’ll also find it easier to keep an eye on your money.
Luckily, it’s simple to track down and consolidate your super by setting up a MyGov account online.
Step 2: Tailor your investment mix
Once you have all your super in the one place, you should decide how you want to invest it.
While your employer keeps making SG contributions, your super will continue to grow. You can make these payments work even harder by choosing an investment strategy that’s right for your life stage. To do this, you need to consider your retirement goals and how long you have to reach them.
When you’re young and have many years of work ahead of you, you also have enough time ahead to ride out the highs and lows in investment markets. This means you could take advantage of a growth investment strategy with the potential to deliver higher returns over the long term.
On the other hand, if you’re planning to retire and cash in your super in the next five years or so, then it may make sense to choose a more conservative investment strategy. Your returns will probably be lower than with a growth option, but they’re also likely to be more stable.
Step 3: Add a little extra to your super
Although the contributions you receive from your employer will make a big difference to your retirement savings, they’re not the only way to build up your super. You can supplement your employer’s SG payments by salary sacrificing part of your pre-tax income — which will make your super grow even faster.
To set up a salary sacrifice arrangement, ask your employer to deposit a part of each pre-tax earnings into your super account. You can choose how much you’d like to put in — up to a maximum of $25,000 per year.
Every extra bit that you put into your super now will pay off in the future. What’s more, you could also make a major tax saving, since the amount you salary sacrifice will be taxed at the low rate of 15%. Before you consider adding more into your super, make sure you understand the different types of contributions made into your super fund as the Government has set limits to how much you can contribute.
Get help from an expert
When you’re planning for your retirement, it can be hard to know if you’re making the right financial decisions. That’s where we can help. To find out how you can boost your super, please contact Revolution Financial Advisers to make an appointment and discuss your situation with us.