While it is easy to be discouraged by superannuation and fear you will never have enough money saved to stop working, remember even a modest superannuation balance can make a big difference in retirement.
For every $100,000 saved in superannuation, you can expect these funds to generate a return of 6%, or $6,000, a year. When this is paid out as a pension, it equates to $500 a month tax-free. Of course, this is doubled if both you and your partner have $100,000 each in super. Depending on your overall financial situation, this can be paid in addition to you receiving a full age pension.
Here are six super tips to help you maximise your super balance:
Tip 1. Consolidate your accounts
Consolidate all your superannuation accounts into one account best suited to your needs. The Australian Tax Office says 4 million Australians have multiple super accounts, wasting millions of dollars in duplicated charges.
These unnecessary fees will needlessly erode your super balance. Consolidating multiple accounts is easy. Simply log on to the ATO’s website and with one click, choose one account to accept all your funds. This alone could save you thousands of dollars.
At Hejaz Financial Services, we can help you run a search with the ATO to find your old accounts and help you consolidate them, this will help you save on unnecessary charges which can affect your overall retirement income.
Tip 2. Review your super contributions.
Check your employer is contributing the right amount to superannuation from your wages each week. If you believe there is a shortfall, contact the ATO to investigate on your behalf.
Tip 3. Take advantage of co-contributions
If you earn less than $52,697 a year, consider making additional after-tax super contributions to take advantage of a matching contribution from the government, called a co-contribution. Under this scheme, you can contribute up to $1,000 of after-tax money and receive a maximum co-contribution of $500. This is a 50 % return on your investment.
The government will determine how much you are entitled to when you lodge your tax return, and if you are eligible, the government will then pay the co-contribution directly to your fund. You do not need to do anything more than make the original contribution from after-tax savings.
Tip 4. Benefit from spouse contributions
Review whether you can benefit from making additional contributions to your partner’s super. If you do make contributions to your partner’s super and they are on a low income or not working, you may be able to claim a tax offset of up to $540 a year.
Tip 5. Contribute any long-term savings to super
There are rules concerning how much you can contribute to super, and when, but any savings put into superannuation will be held within a tax benign environment.
While your fund is in accumulation mode, these assets’ income and capital growth are taxed at 15%, rather than your marginal tax rate. Once you start receiving an income stream, these assets are held within a tax-free environment, making your superannuation your own personal tax haven.
And, if you are thinking of selling your family home to downsize to a smaller property, you can take advantage of the downsizer contribution rules, enabling you and your partner to contribute up to $300,000 each to superannuation. This one step can make a significant boost to your superannuation balance just when you need it, as you enter retirement.
Also, if you are looking to make additional contributions the ATO has also announced that as of 1 July 2021, the concessional contributions annual cap is being lifted from $25,000 to $27,500. Individuals under 65 years of age can also make non-concessional contributions up to $110,000.
Tip 6. Seek professional guidance
Of course, there are a raft of rules around superannuation that you must be aware of. To maximise your retirement nest egg, be sure to seek expert advice from a financial adviser or qualified accountant.
While it is never too early to start making additional contributions to super, it is also never too late. Even small steps towards the end of your working life can and will make a difference to the way you live in retirement.
At Hejaz Financial Services, our Islamic Superannuation has a range of investment options designed to help you achieve your long term goals. We are also known to have outstanding performances and we keep our costs low to pass on your Superannuation returns to you.
If you wish to speak to one of our qualified wealth advisers, you can schedule an appointment or give us a call at 1300 043 529. To find out more about Australia’s Best Performing Islamic Super Option FY19/20* you can visit our website.
We are also Australia’s First and Only Islamic Pension Option, you can count on us to help you retire Islamically.