Finance expert, Anthony Bell has whipped up for us the smart girl’s guide to super. Find out how you can plan for comfortable retirement in your 30s, 40s and 50s.
by Anthony Bell www.bellpartners.com
When deciding how much you require for a comfortable retirement it all comes down to your goals and objectives. Generally, in order to enjoy the lifestyle you’re accustomed to you will need somewhere between 65-70% of your employment income to enjoy a comfortable retirement.
If you’re considering retirement you should put together a budget to find out what your costs of living are and the capital you will require for other goals such as overseas holidays or potentially private school fees for your grandchildren.
For a 60 year old looking to retire now on approximately $50,000 p.a. (indexed to inflation) we estimate they would need around $920,000. This is based on a rate of return of 6% and would last for 25 years.
If you’re looking at your superannuation statement and wondering how I can get there well there are some steps which you can implement now:
30’s
Consolidation – it is quite common that most people in this age bracket tend to have 3 to 4 superannuation funds. By consolidating your superannuation funds you will only pay one set of fees rather than paying 3 or 4 companies to manage your superannuation.
Fees – it is important to find out if you’re getting value from your superannuation provider. My suggestion is to compare the fees you are paying with your current superannuation provider against the marketplace. The fees that you save now can have a significant impact on your balance in 30 years’ time as what you save now can be used to invest and thus increase the balance of your superannuation holdings.
Surplus income – If you have some money you are saving each year it might be worth making an after tax contribution to super especially if your earning under $31,920 as you could be entitled to the government co contribution. If you put in $1,000 to your superannuation account the government will pay you an amount equal to 50% of your contribution. The maximum they will contribute is $500 for this financial year so it’s generally not worth making a contribution over $1,000.
Asset Allocation – you are 30 to 40 years away from retirement so you should consider having the majority of your benefits invested in growth assets such as shares and property. Now is the time to accept short term volatility for long term capital growth.
40’s and 50’s
Asset Allocation – By this time you will generally have accumulated a decent balance within your superannuation fund. It is important to ensure your assets are invested in manner which has capacity for growth but also protected as this is the most important time to ensure you are on your way to having enough in your superannuation to live a comfortable retirement.
Salary Sacrifice – If you have surplus income it’s a good idea to consider salary sacrificing part of your income to superannuation. While this has the potential to increase your balance there are also some tax advantages such as contributions tax at 15% as compared to your marginal tax rate which can be up to 46.5%.
There are other strategies of building up the balance in your superannuation account however it is important to ensure you speak with your accountant or financial adviser as they will be able to assist you with creating the most effective strategy to ensure you meet your retirement goals.
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