Ah, retirement. It’s something people often look forward to – the time in our life when we are finally free to do whatever we like, whenever we like.
Yet the quality of your retirement can rest on one big caveat: money. If you haven’t saved enough, you might find yourself having to really budget and miss out on things. Given that we are now living longer in Australia – with life expectancy at 86 years for males and 89 years for females1 – this frugal lifestyle could last a while.
Everybody’s lifestyle is different, so there can never be a single answer to the question, “How much should I save for retirement?” Some people dream of lavish overseas holidays in their retirement; others will be content with an annual caravan trip up the coast.
To give you an idea of where you’re at, you could use a calculator like the handy retirement planner on the MoneySmart website. This article1 has in-depth information about what people are likely to spend in retirement, too.
If you could give your younger self one handy piece of advice, it would be to start saving for retirement earlier. Sure, when you’re in your 20s and 30s, it can be hard to put money away in an untouchable super fund – particularly if you’re saving hard for a house deposit or face the new costs of raising children.
Yet, due to the nature of superannuation savings, the earlier you start then the easier it is to reach retirement targets. You can make extra contributions to your super on top of the compulsory contributions made by your employer at any age or life stage – all it takes is a little discipline.
Use these strategies to make sure that your super is growing as fast as it can, so you can live the life you’ve dreamed about in your retirement.
1. Find lost super – Did you work at a few different casual jobs through university? Have you ever switched employers? If so, it may be that you have some lost super floating around – because your previous employers may have used a different default fund to your current super fund. You can use the ATO’s MyGov portal to find your super, or your current super fund may help.
2. Salary sacrifice – You can make extra before-tax contributions to your superannuation through the process of salary sacrificing (where you arrange with your employer for some of your pre-tax salary to go straight into your super). There are caps on how much you can redirect – for example, in the 2017/18 financial year, if you are aged between 49 and 59, then you can sacrifice a maximum of $25,000 (this figure includes your employer’s Superannuation Guarantee contributions)2.
3. Get the government’s co-contributions – if you earn less than $51,021, then the government may tip in some extra cash if you make an after-tax (or non-concessional) contribution to your super.
4. Make an after-tax contribution – Anyone can add money to their super savings at any time. If you’ve got some spare cash sitting in a savings account, you could consider moving it into your super account where it will invariably work harder for you and help set you up for a more comfortable retirement. (Note that there are limits to how much you can tip in.)
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