Introduction
Aussies often get close to retirement and reckon they might’ve stacked up more super savings. But hang tight, because there’s still plenty that can be done to fatten up that super, even when retirement’s knocking. Several nifty tricks exist to bulk up your superannuation and sweeten your retirement nest egg. Dive in and uncover these gems right now!
These strategies provide practical ways to make extra contributions to your super account and take advantage of tax benefits. By exploring options such as salary sacrifice and making after-tax contributions, you can significantly boost your super and work towards achieving your desired retirement lifestyle.
Check Your Superannuation Account Regularly
Review Your Account Details
Regularly checking your super account is essential to monitor your progress toward your retirement goals and ensure all details are correct. You can easily access your super account online to review several key aspects.
When reviewing your super account, consider checking the following:
- Account balance and investments: Keep track of your super balance and how your investments are performing.
- Employer contributions: Ensure your employer is paying the correct superannuation contributions at least four times a year, as per regulation. Employer contributions are a significant part of your superannuation.
- Insurance cover premiums, fees, and costs: Be aware of any insurance premiums, fees, and costs associated with your super account to ensure you are not paying more than necessary. Multiple fees can significantly affect your super balance over time.
- Contact details: Confirm that your contact details are up-to-date with both your super fund and the Australian Taxation Office (ATO) to avoid missing important communications and any lost super.
- Lost or unclaimed super: Check if you have any lost or unclaimed super, especially if you’ve changed jobs or moved residences. You can search for lost super through myGov.
- Total super balance: Knowing your total super balance is important, particularly when planning to make extra contributions to your super.
- Concessional and non-concessional contributions: Keep an eye on your concessional and non-concessional contributions, especially if you intend to make extra contributions, to ensure you remain within the contribution caps set by the ATO.
Consider Consolidating Your Super
If you have had multiple jobs, you might have several super accounts. Having multiple super accounts can result in you paying multiple sets of fees, which can reduce your overall super balance and retirement savings.
Consolidating your super accounts means combining them into one super account, potentially saving you money on fees and making your superannuation easier to manage. However, before you decide to consolidate your super, it’s important to consider whether it’s the right move for you.
Be aware that consolidating may mean losing certain benefits, such as insurance or specific pension options, associated with your other super accounts. Additionally, it’s wise to consider any potential tax implications before consolidating.
Top Up Your Super with Extra Contributions
Salary Sacrifice (Before-Tax Contributions)
Salary sacrifice, also known as salary packaging or before-tax contributions, is an effective method to grow your superannuation while potentially reducing your taxable income. This arrangement with your employer involves directing a portion of your before-tax salary into your super account. By contributing to your super through salary sacrifice, the money is taxed at a lower rate of 15%, compared to your usual income tax rate. This strategy is particularly beneficial for middle-to-high income earners, as it can result in significant tax savings.
Voluntary After-Tax Contributions (Personal Contributions)
Making voluntary after-tax contributions, also referred to as personal contributions, is another way to boost your superannuation. These contributions come from your after-tax income, such as take-home pay, bonuses, or tax refunds. You have the flexibility to make these contributions either regularly or as a one-off payment. You can choose to contribute via:
- BPAY
- Direct debit
- Payroll deductions through your employer
Additionally, if you are eligible, you may claim a tax deduction for these after-tax contributions, providing further tax benefits.
Spouse Contributions
Spouse contributions allow you to enhance your partner’s superannuation while also providing tax benefits for the contributing spouse. If your partner makes after-tax contributions to your super account, they may be eligible for a tax offset. For instance, if your spouse contributes up to $3,000 to your super, and you earn less than $37,000 a year, they may be able to claim this tax offset. This strategy is particularly helpful if you are taking a break from work or working reduced hours, as it allows your partner to assist in growing your retirement savings.
Government Co-Contributions
The government co-contribution scheme is designed to help low-to-middle income earners grow their superannuation. To qualify, you need to meet the following criteria:
- Income Threshold: Your before-tax income must be less than $60,400 for the 2024-25 financial year.
- After-Tax Contributions: You must make after-tax contributions to your super.
Under this scheme, the government will match 50 cents for every 1 you contribute, up to a maximum of $500 per year.
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Utilise a Transition to Retirement Strategy
How TTR Works to Increase Super
For individuals aged 60 or older who are still working, a transition to retirement (TTR) pension can be effectively combined with super contributions to boost retirement savings. This strategy leverages the tax advantages associated with TTR pensions.
Key benefits of using a TTR strategy include:
- Tax-Free Income: Income drawn from super through a TTR pension is tax-free.
- Lower Tax on Contributions: Contributions to super are taxed at a reduced rate of 15%.
This tax difference allows individuals to maintain their take-home pay while simultaneously increasing their superannuation balance.
The maximum withdrawal from a TTR pension is 10% of its balance each year. To maximise withdrawals when needed, you can annually top up your pension account using savings from your contributions. This process involves:
- Transferring the existing pension balance back into your contribution account.
- Starting a new pension with the combined balance.
Some super providers offer streamlined processes for this, sometimes requiring only a single form.
Converting to a Retirement Pension at 65
Upon reaching 65, you have the option to convert your TTR pension into a standard retirement pension, even if you continue working. A retirement pension offers several key advantages over a TTR pension:
- No Withdrawal Limits: There is no maximum annual withdrawal limit with a retirement pension.
- Tax-Free Investment Earnings: Investment earnings within a retirement pension are tax-free, whereas TTR pensions may incur up to 15% tax on earnings.
Combining a retirement pension with concessional contributions can further enhance your super balance. You can:
- Make the maximum concessional contributions.
- Withdraw the necessary income from your retirement pension to replace these contributions.
Additionally, the tax-free investment earnings within a retirement pension provide an extra boost to your retirement savings. However, it is crucial to be aware of the concessional contributions cap, as salary sacrifice, personal tax-deductible contributions, and employer Superannuation Guarantee payments all contribute towards this annual limit.
Choose the Right Investment Options
Even without making extra contributions, you can still grow your super by choosing the appropriate investment options within your super fund. The way your super is invested significantly impacts your retirement balance. Therefore, it is important to ensure your investment options align with your goals and life stage.
Consider the following strategies based on your life stage:
- For Younger Individuals or Those with a Lower Super Balance: Focus on growth investments, as you have time to recover from market fluctuations.
- As Retirement Approaches: Opt for investment options that offer less growth but better protect your existing super balance.
Ultimately, the best investment option depends on your personal risk appetite.
Seek Professional Financial Advice
Everyone’s financial situation and retirement goals are unique, which highlights the importance of seeking professional financial advice. When considering ways to maximise your super contributions, obtaining financial advice can give you confidence that you are making the right decisions.
Consider seeking professional advice from:
- A registered financial adviser
- Your super fund
- A registered tax practitioner
Conclusion
Boosting your superannuation before retirement is achievable through several effective strategies. Regularly checking your super account, consolidating multiple accounts, and making extra contributions such as via salary sacrifice or after-tax contributions can significantly grow your super balance. Utilising strategies like transition to retirement pensions and choosing appropriate investment options are also beneficial ways to enhance your retirement savings.
To ensure you are making the most of these strategies and tailoring them to your unique financial situation and retirement goals, consider seeking professional financial advice. Contact Money Path today to explore personalised solutions and take confident steps towards boosting your superannuation and securing your desired retirement lifestyle.
