Superannuation & Retirement Planning

Contributing to a Superannuation Fund is the best way to accumulate wealth for retirement. You could even consider setting up your own Self-Managed Superannuation fund. We can help you work out how much money you need to retire on to maintain your desired lifestyle and how you can go about achieving that goal.

There are many legislative changes happening in the Superannuation area. If you are close to retiring, it is important to talk to us to see how these changes affect you – it could make a big difference to your retirement funds.

Employer Contributions
Legislation requires that an amount equivalent to 9% of wages be paid by an employer into a superannuation fund on behalf of an employee.

Whilst this is good news, will it be enough to support you in retirement?

Presented below are some ideas on how to “top up” your superannuation.

Superannuation Co-Contribution
One of the most beneficial ways to top up your superannuation is to make use of the governments co-contribution. If you are not already doing so and earn less than $58,000 per annum, you could make a personal (after tax) superannuation contribution to your fund. The government will then match your contribution up to certain limits.

For example, if your income for tax purposes (assessable income + reportable fringe benefits) is <$28,000 per annum, the government will put in $1.50 for every $1 you put into your superannuation. So, if you personally contribute $1,000 into Superannuation, the government will co-contribute $1,500.

To find out whether you are eligible for the Superannuation co-contribution and how much you are entitled to, have a chat to one of our CPA’s or Financial Planners.

Salary Sacrifice
Another popular strategy to top up your superannuation is to sacrifice an amount of your salary into superannuation – it can make a big difference to your retirement funds. It is about you “sacrificing” some of your gross or pre-tax salary now and putting it into your superannuation.

For example, if you earn $80,000 you will be taxed at $19,850 and have made no additional contribution to superannuation. Your net position is $60,150

However, say you elect to salary sacrifice $5,000 out of pre-tax salary and put it into superannuation. A couple of benefits arise –

1. $5,000 goes into superannuation and is taxed at 15% (tax rate for superannuation funds) Therefore, you have contributed $4,250 into Superannuation.
2. Gross income minus salary sacrifice equals $75,000 taxable income. Tax on this amount is $17,850 (net of medicare), an immediate tax saving of $2,000. Your net position is $57,150

Overall net position is $4,250 in Superannuation and $57,150 net salary a total of $61,400 (as opposed to $60,150 with no salary sacrifice strategy in place)

Imagine if you did this every year. With the added benefit of compounding – you’re off to a great start towards saving for your retirement.

Before implementing such a strategy it is important that you talk to us to assess your individual needs.

Retirement Planning
Let’s look at how a Financial Planner can assist a typical couple wanting to do something to enhance their retirement.

Mike (48) wants to retire at age 60. His wife Jane (49) wants to retire at age 55. Currently, Mike has $189,945 in his Superannuation Fund and Jane has $72,136 in her Superannuation Fund. Jane & Mike for see that they will need $50,000 income per annum for their retirement. Their Financial Planner has calculated they will need $860,000 in retirement.

Assuming their employers meet their 9% Superannuation Guarantee requirements, their Superannuation Fund has net earnings of 7% and their salaries increase by 4%, the Financial Planner has calculated that Mike and Jane will have a superannuation deficit of $107,255. How will they make up this difference to ensure they have $860,000 for a comfortable retirement?

• Through salary sacrifice, Mike can make additional contributions of $3,120 per annum. This only equates to $60 per week.
• Jane could make an un deducted superannuation contribution of $1,000. This only equates to $19 per week.
• In addition to her contribution, the government will make a co-contribution of $1,400 per annum.

And just like that, Jane and Mike can retire at 55 and 60 years of age respectively !

Disclaimer
The above is general advice only and does not take into account the specific needs of individuals. You need to consult with your financial adviser before implementing any of these strategies.