There are three relatively simple steps to improving your superannuation, and therefore your chances of enjoying a comfortable and/or early retirement.
1. Don't pay higher fees than necessary
The fees charged by super funds vary dramatically from one fund to the next, and higher fees don't necessarily equal better returns or a better fund.
High fees can have a huge impact on your final super balance, so simply ensuring you're in a fund with a competitive fee structure can lead to a much healthier super balance.
2. Ensure your investments are right for you
Most Australians currently have their super invested in the 'default' fund nominated by their employer. This means that a senior manager close to retirement may have the same investments as their 20 year old colleague fresh out of university. Is this appropriate? No way!
If you're comfortable with investment risk and have a long investment timeframe, you may be missing out on potential gains by being in your employer-selected default fund. Conversely, if you're a conservative investor and/or have a short investment timeframe, your employer's default fund may be exposing you to more risk than is appropriate - something that was experienced by many Australians close to retirement during 2008.
3. Use tax effective contribution strategies
A sure fire way to increase your retirement fund is to contribute more of your income. Contributing just a few dollars a week from a young age can have a huge impact on your super, and with annual contribution limits continually shrinking, getting more into your super over an extended period, rather than a last minute rush once you're in your sixties, can definitely be a good strategy.
Using salary sacrifice, by asking your employer to contribute some of your income to super before tax is deducted, can be a great way to increase your super and decrease your tax.
For example, if you are in the 30% tax bracket and salary sacrificed $5,000 into your super over the year, you would only pay 15% contributions tax instead of your marginal rate of 30%. This would equal a saving of $750 in tax. For those in higher tax brackets the savings are even greater.
Using a financial planner
Although these three ideas may seem simple in theory, Australia's complex super laws can get people into trouble if they don't have a good understanding of these laws. Equita advisers are fully qualified and authorised to provide professional super advice to guide you towards a comfortable retirement.
