Lesson type: Understanding investment philosophy
Why super should be a girl’s best friend
We’ve all heard the saying that ‘diamonds are a girl’s best friend’, but in an age where the majority of us will be required to fund our own retirements, perhaps our superannuation balances should be instead, writes Joanna Ryan.
Are you a woman who has taken time out of the workplace to raise your children or to look after ageing parents? Have you returned to work after a lengthy absence and had to start all over again at the bottom of the ladder, being paid just enough to cover your childcare costs? Have you returned to a part-time role so you can balance your home and work life?
If this is you – you are not alone. Sadly, this is the scenario many Australian women face, which results in us lagging behind our male counterparts, earning less and amassing lower super balances. Research has shown we will live longer and most likely retire earlier than men, but to do this comfortably we will need a bigger retirement nest egg.
However, all is not lost. With some careful planning and financial discipline, you can make up for lost time when it comes to your super. Your superannuation is a powerful investment structure which you can’t afford to ignore. In the time between investing and accessing your super savings you are able to take advantage of the magic of compounding. Make some changes today, for these small steps can make a big difference to your future.
Here are our key steps to growing your super balance:
- Find your lost super – you may have a super account from a previous job that you didn’t know about. More than one super account often means a duplication of fees and charges. If you have more than one super account, think about consolidating your money into a single fund.
- Understand your super – know where your money is invested what your investment option is, understand your investment time horizon and the amount of risk you are comfortable with. Your investment option should be consistent with the level of risk you are prepared to take and the time frame you have until you retire.
- Understand whether you have any insurance linked to your super account and consider this before closing any super account.
- If you can afford to salary sacrifice, set up a salary sacrificing arrangement with your employer, so some of your pre-tax earnings can go straight into super. Your employer will also be contributing 9.5 per cent of your salary into super in the form of Super Guarantee (SG) contributions. These contributions along with any additional salary sacrifice contributions are known as concessional contributions. You are able to contribute a maximum of $25,000 per year by way of concessional contributions.
- If you are able to, contribute to super out of your own pocket. These are after tax contributions or also known as non-concessional contributions. There are rules around the amount of non-concessional contributions you can make on an annual basis, but in general there is a $100,000 limit per annum.
- If you earn less than $51,813 per year and make non-concessional contributions to your super, you may be eligible for a co-contribution from the government. The maximum co-contribution is $500 and to receive the co-contribution you will need to lodge a tax return for the year.
- If you earn less than $37,000 per year, you may also get the ‘low income tax offset’. The maximum amount of the low-income tax offset is $500 and it will automatically be paid into your account if your super has your tax file number.
- We are great believers in the power of these small steps to change your financial future. Get started today.
Joanna Ryan is the principal and founder of Lumix Wealth. She is a specialist financial planner working with corporate women and business owners, ensuring they make smart decisions about money.
She is a Certified Financial Planner, a professional member of the Financial Planning Association of Australia, and a Fellow of the Financial Services Institute of Australasia (FFin). She has worked in finance and money management for over twenty years, managing teams of financial planners, educating and consulting to fund managers and financial planners.
The opinions expressed in this content are those of the author shown, and do not necessarily represent those of No More Practice or its related entities. All content is intended for a professional financial adviser audience only and does not constitute financial advice. To view our full terms and conditions, click here.