Maximising your super

Boosting super

Super is seen as confusing and complex by many people, but it doesn’t have to be.

Although you build up your superannuation over the course of your working life, there are extra steps you can take to boost those savings before and during retirement and make the most of what you have.

The key factors you need to establish before assessing how your super is going, and looking at ways to boost it, are:

◆ How much money you need for your retirement

◆ Whether you are on track for the retirement you want, or what you can do to put yourself on the right track

◆ How long your super will last This will depend on the other important factors, such as when you want to retire, how you want to live in your retirement and where you live.

Jacki Ellis, Head of Retirement at Aware Super, says one of the best things you can do during retirement planning is to make use of the services your super fund offers. Most super funds should have a broad range of information available on their website, digital calculators and tools, and importantly, provide free advice on super investment for non-complex cases.

If your situation is more complex, your super fund will likely offer more comprehensive advice for an extra fee.

“Making use of services like these can make a world of difference not only to your retirement outcome, but to your confidence as you near and enter retirement, ensuring you have one less thing to worry about at a time of major change,” Ms Ellis explains.

As you approach retirement you can make additional contributions to your super which boost your funds and, as a bonus, are also tax effective.

If you’re on a marginal tax rate of above 15 percent you could save on tax, as contributions up to $27,500 a year, including contributions from your employer, are tax-deductible and taxed at a maximum of 15 percent, assuming you earn less than $250,000 a year.

Couples where one partner is already receiving an Age Pension but the other is still too young to receive it may also benefit from making more contributions to super in the name of the younger partner. This can be helpful because money held in the younger partner’s super fund is not counted under the asset test until that person is at Age Pension age.

While these seem like wonderful options, it is still necessary to take into account several factors before making extra contributions, to make sure this is the right step for you.

You need to consider your broader financial goals, how much money you realistically need in the short term, how much you can afford to put away, and how the concessional contribution cap might affect you.

Contact your super fund for advice on strategies to maximise your funds.

Changing accounts

Your provider can also give advice on when to access your super and what type of account is best for your current situation.

For example, an account-based pension provides regular tax-free income and investment earnings for retirees, as well as the flexibility to take out extra cash payments if you need them.

But another option is to keep your existing super account, which is likely an accumulation account, open and only make lump sum withdrawals. You would continue to pay 15 percent tax on investment return with this option but you wouldn’t have to meet the minimum income drawdown, as you need to with an account-based pension.

If you’re still working but you’ve reached your preservation age, a transition-to-retirement account is also an option.

This enables you to receive an income from your super while continuing to work. You can also contribute more to your super at the same time as a tax-effective way of building your nest egg.

Ms Ellis says no matter the account option you choose when you retire, you must keep in mind it is important to stay invested.

“Our modelling shows that around one third of your income from super is likely to come from the investment returns you earn after you’ve retired. So it’s still critical that you’re with a strong-performing fund with competitive fees even when you’re no longer working,” she says.

“Take the time to check your super fund is delivering for you.”

Super fund members who seek out advice on their investments, Ms Ellis says, also are more likely to consolidate and simplify their finances, avoiding multiple fees.

These investors make voluntary contributions at a higher rate, make the most of Centrelink benefits, and ultimately have more income in retirement.

If you’re not sure where to start when it comes to accessing or maximising your super, first look to your super fund for advice.