Superannuation is how most people save for their retirement during their working life.
Employers must contribute 9.5% of your taxable income to your super. This is set to rise to 10% from first July 2021,
and progressively up to 12% by July 2025.
If you rely on those contributions to your superannuation alone as your saving vehicle unfortunately you may end up
with insufficient balance to provide you with your needed retirement income once you stop working.
As a rule of thumb most people generally require
around 60 to 65 % of their pre-retirement income to live comfortably in retirement.
Super is regarded as an effective and preferred way to invest for the future due to many tax benefits it offers.
So today let's check 9 ways how we can boost your superannuation balance to make it work for you as hard as possible.
If you don't know me - my name is Katherine from About Retirement, I'm Certified Financial Planner
and I started this YouTube channel as my way of helping as many people as I possibly can
to be well financially prepared for their retirement. I've been in financial planning industry for over 20 years,
and I have seen proof how good planning can help you reach your desired outcome.
So let's start planning your financial successful future and today our topic is:
How to boost my superannuation balance and retire with more.
1. Extra super contributions
This is an obvious one. The more money you contribute, the more money you will have for your retirement.
But there are so many ways how you can make those contributions, and you really need to be smart about the most effective way
that will work for you and provide the biggest benefit.
The choice of contributions will depend on your personal circumstances, your level of income and your stage of your life.
I have created an extensive library of videos by now about different types of superannuation contributions,
from undeducted - what we call "non-concessional contribution" this is the correct industry name,
to concessional contributions, salary sacrifice, spouse contributions or contribution splitting or downsize contribution.
But think also: "Is there any other benefit that I can have, that I can get based on the contribution choice that I make?"
For example: Are you after the good tax offset?
Or maybe general reduction of your tax bill when preparing for your tax return?
Or maybe a government co-contribution?
So understand those contributions, understand your benefits and
be "super-money" smart. Every extra contribution helps.
2. Risk profile
The investment risk profile you choose may have big impact on the level of growth of your savings.
The higher the risk, the higher the return over time, but also that increases your fund's volatility,
meaning greater rise and fall not only of your annual returns but of the value of your overall superannuation asset.
So what's your risk profile? What level of risk, volatility or loss are you able to accept?
One thing that I do need to underline here is our life expectancy is so much longer
than our previous generation and a generation before.
If you retire today at the age of 65, you are expected to live well into your mid 80s or even 90s.
That indicates to me 25 to 30 years in retirement.
That is a very long time to be provided with an income from your savings,
and one of the ways you can help your super balance stay as high as possible for as long as possible
is not to be too conservative with your investments, even if you have to accept a greater degree of market volatility over short term.
3. Insurance
Insurance is an essential part of planning for reaching your financial goals.
Sometimes it is very beneficial to keep it within your superannuation fund, but not always.
It depends who is your intended beneficiary and what outcomes you are trying to achieve.
Tax can also be of great issue, as well as access to your superannuation payouts.
For example: if you make an insurance claim, you might meet the requirement of insurance underwriting
and your claim might be successfully paid to your super fund, but if you have not met conditions of release
your insurance payout will get stuck and locked in your superannuation fund until you do.
This is why it is essential to know what type of insurance is beneficial to have within super and
what insurance you should own personally.
Another issue is to check the level of your actual cover. Do you still need it? Do you need the same level of insurance?
The insurance company might be very happy to continue to cover you as premiums do go up in price when you get older.
But your loans might be paid off, your income position might have changed,
maybe cover outside of the superannuation would work better for you, maybe another company is more competitive price wise,
or you get a better tax deduction if paying personally for those premiums?
This is where checking your financial situation is essential. There is no general answer,
as it all depends on your income, your super, your age, your tax rate and the actual reason to have insurance in the first place.
At some point you have to check how much that insurance premium is eating away your super savings and if you really still need it.
4. Investment diversification
I always say that diversification is KING in investment world.
We all know the saying: "Don't keep all your money in one basket".
There is a lot of truth to that as diversity of your investment is essential to reduce your risk.
If you buy shares in one company, no matter how big prestigious and well-known it is
you are at mercy of that one company's performance.
Think AMP that used to be stellar financial services company one of the oldest.
Well if you had all your savings invested in that one company you are toast!
So investment in several companies will automatically reduce your investment risk.
By diversifying you can invest into different types of stocks, markets, financial products.
To achieve this level of risk reduction you should really consider:
geographical diversification for example, so investment not only in Australia but across all other countries as well.
You should diversify between different asset classes: cash, fixed interest, property and shares.
Each of those assets provide different returns in different economy cycles.
Some will provide you with the income, others with capital growth and others might provide mixture of both.
And within each asset class, you should really diversify between different industries.
For example: energy, financials, materials, health care, industrial, real estate, telecommunication and more.
But then go deeper and diversified within each industry, especially if your preferred way of investing are direct shares.
So if you want for example to invest into telecommunication, if you invest into Telstra which is struggling a little bit right now,
but remember to invest also into other smaller companies for example such as TPG.
Due to company size and different customer base, they can give you different investment outcome.
A similar example might be if you want to invest into banking. Don't invest just into BIG 4.
They all perform exactly in the same way, in the same cycle.
But if you pick for example Commonwealth Bank choose a smaller bank as well,
such as Bank of QLD or Bendigo Bank. You will find less correlation between those two.
Those are not recommendation but rather examples of the principle.
I could talk about investing forever, as I love this subject but we are short on time here
so for now I invite you to download my eBook: "12 principles of investing", that goes into more details how to be a successful investor.
5. Exposure to growth
It is very hard to make your superannuation savings grow without exposure to growth assets.
Keeping money in cash long term is no way to go.
So how much exposure to growth assets is correct for you and what type of assets should you be investing into?
I do hope I've managed to prove to you that investing into well-diversified growth-oriented fund,
that will provide an income benefit for your life is essential.
If you are too conservative with investing, you run the risk of outliving your savings
and this is the worst possible outcome.
6. Fees and charges
Nobody likes to pay fees but the fact remains that if you want to invest into quality assets you need to accept some cost.
The question is: do you have the right assets, and are you paying the right price for them?
What fees are acceptable and when are you paying too much?
Go over your superannuation statement and check the fees.
I have already done a video that fully explains different fees that most superannuation funds charge,
so have a look, compare with your super fund and make a decision if your current super is overcharging you or if you are happy with it.
So up until now, have you found any beneficial information that you can actually implement into your super checkup?
If yes click LIKE button and SUBSCRIBE as i do create new video every week, to keep you up to date with those important money details.
7. Find your lost super
It is very easy to lose track of your super if you've changed jobs several times over the years,
especially with casual and part-time jobs.
So not only you could be paying several sets of fees but most likely your super savings are not even investing for your benefit.
There are companies that make fortunes by searching those lost super funds,
then writing a letter to you, advising you where you have your money and how to access this.
Well it is so very easy right now, just go to the ATO online and search My Gov by going to: "Manage my Super".
If you're not registered I will list the link below my video how to get registered.
8. Consider consolidating your super accounts
This is the advice you must have heard millions of times and in some cases it is good advice,
but it really depends on what you want to achieve. Sometimes there is a reason not to have one account at all.
For example, when I structure my clients' retirement income it also needs to be beneficial for:
tax, for Age Pension, security of income, capital growth, risk reduction of the investment portfolio.
One super fund is unable to provide all those benefits.
Before you transfer money to another fund, check exit fees or withdrawal fees.
Check any possible tax implication or loss of benefits that new super fund may not provide you with.
As you can see, nothing within retirement savings, superannuation, financial planning is straightforward,
so I really hope this video will help you,
but I honestly believe, if this is the topic not very clear for you or you struggle to make it work
or you just cannot be bothered with all this information required to make it work, my biggest suggestion is:
9. Ask for good financial advice
Especially retirement advice.
Talk to people who understand this area, have been doing this for many years,
have knowledge and experience to support their claim to be able to help you.
You are most welcome to always contact me but if you do have your own and trusted advisor,
good on you, congratulations, and keep that person on as the benefit can be enormous.
So let's recap those nine ways to improve your super:
1. Extra contributions
2. Improve your risk profile
3. Check your insurance
4. Investment diversification
5. Exposure to growth assets
6. Fees and charges
7. Find your lost super
8. Consider consolidating your super funds if this is beneficial for you and
9. Discuss it all with your financial planner
So please let me know which of those steps are best for you? and which ones you believe will assist you the most?
And don't forget to grab that eBook of mine "12 PRINCIPLES OF INVESTING".
Please leave your comments and questions below the video,
I would love to know what you think if you agree or disagree,
or maybe you can mention other steps that you take to improve your superannuation and investment outcome.
And now, I would like to show you extra videos that can help you
with your superannuation decisions, contributions how to save on tax and more.
The second lot of videos is, if you have already retired
and wish to understand Age Pension system and how to improve it for yourself.
If we all create life of security, prosperity and joy, the world will be a much better place.
Talk to you next time. Bye