Super Strategies
Saving in Super makes sense because it's a low-tax environment where your money can work a bit harder for you. For business owners, it's also a way of shielding their savings from bankruptcy and creditors. While it's not the perfect saving structure for everyone or every set of circumstances, it certainly deserves a second look, beyond just your employer's compulsory (SG) super contributions.
Super. Don't ignore it: it's your money just not yet.
Simple rules for you super
- Know what type of asset allocation you're invested in - the default investment performance is usually, well - below average performance.
- Get to know your own risk profile (or investor behavior profile)
- Always have your beneficiary nominations up to date
- If you pay insurance from your super (because it's 15% cheaper to do it that way), consider topping up your super balance once a year or so, to reimburse some of your investing power.
- Know how much you need to add if you ever want to 'max out' your super (because the amounts change every year) - then choose an amount and salary sacrifice that into your super.
Pro Tip: Sure you can add more to it, but knowing how you invest your super also has a big effect on the performance of your money.
Save a minimum extra amount for your retirement
More a mindset than a hard and fast rule, getting into the habit of consciously living below your means and developing the habit of saving a little more, is a core life skill to start early. This is a great approach to apply to your super fund balance too.
There are many ways to work with your Super
There are many ways people work with their super. Some use a set-and-forget salary sacrifice strategy adding an additional set amount of money fortnightly. Others check in with their super balance once a year, and others like to take more personal control and set up their own Self Managed Super Fund (SMSF) and make active decisions about how they will best prepare for their future retirement.
The important thing is that you start to take an interest in your super. After all: it's your money, just not yet.
Everyone wants an easy answer
Saving the right amount for your retirement is complicated – we so get that – and it's always a difficult question to answer: 'Should I add more savings into my default super contribution?'
Like all people, you have immediate goals you need to meet, debts to manage, car loans, cards and even student loans, perhaps saving a deposit for a home (then paying down the mortgage to a less terrifying level) and you want to enjoy your life too. That’s perfectly understandable.
But saving for retirement is a marathon, and using the power of compound interest and dollar cost averaging means any money you save now can be worth much more by the time you retire. If you wait too long to start saving, you could find yourself investing twice as much and still not catching up.
You can increase the balance of your super fund by automatically adding to it directly from your wage. If you decide to sacrifice some of your salary into your super account, you make an agreement with your employer for them to deposit some of your pre-tax salary directly into your super fund, rather than into your bank account with the rest of your salary where it will be subject to tax.
It's more a mindset than an amount when you're starting out
So, the answer for when to start saving for retirement is; now. But the amount doesn’t have to be huge. You can start by salary sacrificing an additional amount into your employer's sponsored Super fund (up to the allowable limits) while continuing to focus primarily on your other goals.
If you save and invest continuously, even if it’s a small amount, over time you can build valuable savings without disrupting your lifestyle now. Starting out small as soon as you can, means you'll probably grow not to miss that extra amount being automatically sent into your super - and your future self will thank you for it.
Balancing retirement savings with paying off debt
If you have debt you’re working to pay down, you can increase the amount you’re contributing to your Super savings as your debt gets smaller. Once you’re in a rhythm of making payments, consider how to best allocate the amounts. Why not commit to simply putting 1% of your wage into your Super?
Don’t over-complicate your lifestyle
Saving extra for retirement isn’t easy. It’s even harder when you’re trying to pay off student debt, and home mortgages (and grow a business) as you save.
- Remember all progress is made over time, so the earlier you start, the greater the future growth of your savings.
Do what you can, and be realistic. You don’t need to sacrifice important life moments and experiences in order to reach your savings goals. Life is meant to be lived!
How we can help
Having a strategy for your super is an important part of providing for yourself and your family into retirement while reducing the pressure on your business as the sole source of your future retirement funding too.
Contact us for a confidential chat about your needs.
Related: Saving & Investing 101
- Savings as Investing
- Super Strategies
- Investing In Property
- Savings Bonds and Insurance Bonds
- What is your Investment Risk Appetite?
