The GFC was the catalyst to Aussies focusing on the state of their savings. A combination of hard financial times and a general poor track record for saving money has left many with the realisation that their superannuation fund isn’t so super, which means a need to catch up.
Even if your financial planning is on track a top up won’t hurt. We asked Nigel Bowen to provide a few suggestions on how you can improve your retirement fund quickly.
Just like you can never be too rich or too thin, you can never have too much money in your super account. Here are some strategies to increase your super.
To keep things simple, let’s say you’re single and plan on scraping by on $40,000 a year for no more than two decades after you down tools. To manage that, you’ll need to have around half a million dollars in your super account when you retire. Unsure just how much super is enough?
Broadly speaking, there are three ways you can increase the amount of money available to fund your retirement.
1. Increase your contributions
Sure, this seems painfully obvious, but the reality is that most of us don’t consider making voluntary super contributions until retirement is looming on the horizon. And if you’re self-employed, there’s a good chance you’re putting hardly anything into your super while you concentrate on ploughing money back into your business or paying off the mortgage. Federal governments of all persuasions are keen to encourage voluntary super contributions and offer a range of incentives, from favourable tax treatment for the well-off to matching funds (aka a ‘co-contribution’) for those on low incomes. If you have the foresight and self-discipline to put more than the bare minimum into super starting from your early 40s (rather than your late 50s), the magic of compound interest guarantees you’ll either be able to retire earlier or more comfortably – or both.
2. Stop others siphoning off your hard-earned money
You want the money you put into super to be earning interest for you rather than lining the pockets of your financial planner. If you’re being charged above average ‘management fees’ on your super account without getting above average returns, it’s time to shift super funds.
3. Implement a high risk, high return strategy
Most super funds offer their members the option of having their money put into investments that are riskier but which can potentially generate impressive returns. If you’re the gambling type and believe the market will be bullish in the years to come, it may be worth taking a bold approach, but seek independent professional financial advice before doing so.
While you’re still capable of earning an income, it’s never too late to do something to increase your super. If you do reach retirement age without having as much money as you would like, you can always continue working, possibly on a part-time basis, for a little longer. On the other hand, if you’re smart about growing your super from a relatively young age, you’ll have the option of retiring five to 10 years earlier than your colleagues.