Retirement planning is something we probably don’t think about until we’re actually close to retiring age. But often that’s too little too late! Getting on top of things early in life can save pain down the track.
All employers in Australia must pay a compulsory nine per cent of an employee’s total wage into a super fund. This is called superannuation guarantee contributions (SGC). But this is only the minimum requirement.
According to Switzer Financial Services, the experts say to retire comfortable you need to save 15 per cent of your income in an investment such as superannuation for 40 years! This shocks many people.
Many people receive the age pension for retired persons in addition to what they’ve saved in super. At the moment, people can receive this once they turn 65. In coming years, the age at which you can generally access your super and apply for the age pension will be 67 years old.
Currently the age pension is $671.90 a fortnight for singles and $506.50 each a fortnight for couples. This amount changes twice a year, so check the Centrelink website for up-to-date amounts.
This isn’t much to live on so retirement planning is crucial to build up your nest egg to retire comfortably.
Retirement planning; salary sacrifice
One way to boost the amount in your super fund is through salary sacrifice.
You can arrange with your employer for an extra amount on top of the compulsory nine per cent to be put straight into your super fund.
The benefit is this is the amount is taxed at 15 per cent, and not the rate you pay for your income tax. This can save some people over 30 per cent in tax. Remember though, you generally can’t access this money until you retire so be careful you’re not overdoing it.
Also, there are contribution thresholds, or maximum amounts you can add each year. Currently, if you’re under 50, the threshold is $25,000, while 50 and over is $50,000. If you add more than the threshold, the excess amount will be taxed at a higher rate. Check the Australian Tax Office website for more information.
Choosing the right superannuation fund can make a difference to the amount you’ll have saved and receive when you retire.
Industry funds, for example don’t pay commissions to financial planners and have lower fees, where as master trusts do pay commissions and generally have higher fees.
Questions to ask
Switzer Financial Services says to ask the following questions when thinking about retirement planning;
· Where should my money be invested?
· How much superannuation will I need to build up?
· What other investments do I need to make?
· Is my retirement planning strategy tax smart?
· What is the financial game plan before and after retirement?
· How do I get the social security entitlements while minimising tax?
· How do I protect myself from running out of money in retirement?
A financial planner, such as Switzer Financial Services, can help you answer important these questions about retirement planning.
For advice you can trust, book a complimentary first appointment with Switzer Financial Services today.
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