How’s your super balance looking? Perhaps you’re not sure – or you’re genuinely too scared to look, which is probably the case for many Australian women. After all, research shows women (due to various reasons around employment and caring duties) retire with about 47 percent less super than men – and that’s even before we were offered the chance to dip into our super during the pandemic.
No super or not enough in your superannuation balance can mean a future in which you’re relying on the Age Pension as your sole source of income, and that might not be sufficient for the kind of retirement you’d like to have. Having a financial strategy that makes growing your super balance a priority is important – whether you’re just starting out in your career, or getting close to retirement age.
How much super do you need?
Calculating how much super you need rests on what type of lifestyle you want in retirement. Do you want the means to travel regularly, eat out, be able to buy the things you want or cover unexpected medical bills? Considering all these types of things is key.
As a guide, the Association of Super Funds of Australia (ASFA) suggests couples who want a comfortable retirement will need $640,000 in super, while a single person needs $545,000 in super. (Both of these numbers assume you’ll also receive partial support from the Age Pension).
Of course, to get even close to those amounts and take advantage of compound interest in order to build your super, it’s important to start socking away as soon as you start earning, and continue to do so throughout your career.
Consolidating your super
If you’ve bounced from job to job, you may have a few forgotten superannuation accounts knocking about – and more super than you thought (bonus, right?). The good news is, consolidating all your super into the one account can help you manage your funds more easily, keep track of how your super’s growing – and most importantly, save on fees.
You can find any lost super accounts by checking in your MyGov account under the ‘Super’ tab, ringing the Lost Super Search Helpline on 13 28 65 or completing a form. Once you’ve found any other super accounts, you can consolidate them into one account via myGov, but just check that you won’t lose any insurance linked to a super account you want to close. If you’re rolling super into another account that’s not linked to your current employer, you’ll also want to notify them so they keep paying super into the right account.
Turbo-charging your super
If your super’s not growing as fast as you’d like, there are ways to proactively boost your super balance.
Salary sacrificing As part of the super guarantee, salaried employees receive a 9.5 percent contribution from their employer, but you can choose to ‘top up’ your super by asking your employer to send a portion of your salary directly into your super fund – otherwise known as a salary sacrifice. This hits your super account as a concessional contribution, made before tax, so you’ll be taxed at a maximum rate of 15 percent only. You may also find the salary sacrifice takes you down into a tax bracket which is more beneficial for you, but always check with a tax accountant.
After-tax contributions Another way to significantly boost your super is to make a non-concessional contribution, which goes into your super account after income tax has been deducted. You might decide to do this with any extra savings you have, or with payments you receive such as inheritance or money you receive from the tax man.
What if you’re self-employed?
Paying super is not compulsory if you work for yourself, but failing to factor it in can leave you at a huge financial disadvantage come retirement age. But it happens: research shows that 20 percent of self-employed people have no super at all.
That’s not the worst of it, either – we also know that the average super balance of self-employed women aged 60-64 is around $83,000 compared to salaried female employees, who typically have an average of $175,000 in super at the same age.
Making lump-sum concessional contributions whenever you can afford to may be the best way to build your super – and you may be able to claim tax deductions on contributions and even save on the tax you pay. It’s also worth checking whether you’re eligible for bonus government co-contributions, which are usually put into your account automatically.
Long-term benefits of super
Obvously, super is one of the most important long-term investments you’ll ever make in your future – because once you retire, you want to ensure you have enough funds to cover you for the rest of your life.
Retirement can last a long time, and the Age Pension just may not be sufficient for you to do all the things you planned for – whether that’s travelling to visit family, take up some new hobbies or just have peace of mind that you have funds to pay for unexpected expenses.
It’s also a great way to save, because the government provides you with decent tax concessions – and you can’t touch your money until preservation age (between 55-60).
Super and insurance
Your superannuation fund may bundle default life insurance into your policy – and it can be cheaper than taking out separate life cover – but it’s wise to check exactly what you’re covered for, and whether it’s adequate for your needs.
To give you an idea of the cover you might need, actuaries Rice Warner say for a 30-year-old parent, you’d need to have $561,000 basic level death cover and $874,000 basic level TPD (total and permanent disability) cover. For a 50-year-old parent, it’s far less - $207,000 in death cover and $499,000 in TPD cover.
If you’ve opted out of insurance in your super fund and your family is reliant on your income, consider taking out a separate life insurance policy that ensures your loved ones will be provided for in the event of your death or if you’re suddenly unable to work. You might also like to explore income protection.
In the end
Being smart about your finances and planning ahead for retirement is important no matter what age you are – and super is a key part of that. Remember: your super is your money and it compounds as the years go by.
We hope this has given you some ideas on how to boost your super balance, ensure you’re adequately covered with insurance and have peace of mind knowing you’ve planned ahead for a comfortable retirement!
This information is general in nature and has been prepared without taking your objectives, needs and overall financial situation into account. For this reason, you should consider the appropriateness of the information to your own circumstances and, if necessary, seek appropriate professional advice.