Have you thought about super contributions? If you’re worried about saving enough for retirement, contributions could be a great way to boost your super and provide you with confidence in your savings.
How much do you need to save for retirement?
Whether you’re dreaming of pottering in the garden every day or travelling the world during your retirement years, at one point or another we all question how much money we’ll need to retire.
The amount you need to save depends on your current finances and your lifestyle goals. According to ASFA’s latest September 2021 Quarter release, for homeowners, the minimum annual cost of a comfortable retirement is estimated to be:
Singles: $45,239 (aged 67-84 years) and $42,846 (aged 85+ years).
Couples: $63,799 (aged 67-84 years) and $59,389 (aged 85+ years).
The lump-sum savings required to generate the above figures are estimated to be $545,000 (for singles) and $640,000 (for couples).
These numbers are on the rise with the highest annual increase in retiree budgets since 2010.
So how can you keep up with the rising cost of living and make sure you have enough money to fund your retirement?
1. Personal contributions
If you are employed, your superannuation will be growing through mandatory employer contributions at a rate of 10%. However, if you’ve been in the workforce a while, you may not have saved enough in your early years when the mandatory superannuation rate was much less. If you know that this isn’t enough to fund your retirement, we recommend looking at other options.
You can boost your super through personal contributions which can be either a large lump sum or small regular amounts after tax. Personal contributions aren’t claimed as tax deductions in your income tax return.
2. Voluntary employer contributions
Salary sacrifice is a voluntary employer contribution where you opt-in to have some of your pre-tax salary contributed to super.
If you are employed, you can create a salary sacrifice arrangement with your employer. Once the arrangement is established, regular contributions are made directly to your super fund via your payroll.
Some employers may not offer their employees the option to engage in a salary sacrifice arrangement so it is important to check with your employer before researching further.
3. Spouse contributions
Another option is increasing your spouse’s super balance by contribution splitting. These contributions can be effective in boosting your combined super savings in a tax-efficient manner.
Alternatively, you can make a non-concessional contribution to your spouse’s super—up to their relevant non-concessional contributions cap limit. You may also be eligible to receive the Spouse Contribution Tax Offset of up to $540.
4. Downsizer contributions
Looking to downsize? Accessing the equity in your home is another way to boost retirement income.
If you’re aged 65+, subject to meeting other eligibility criteria, you may use the proceeds from the sale of your home to make a non-tax-deductible downsizer contribution of up to $300,000 each (up to $600,000 per couple).
Chat to a Financial Planner about your options
Before arranging contributions, we encourage you to speak to a Financial Planner to discuss the right option for your individual circumstances. A tails strategy will allow you to boost your super in the most efficient way possible and pay less tax!
Click here to learn more about APS Financial Planning and to get in touch with our team.