The many ways you can boost your super
The goal of having super is to grow your super so that it can provide a source of income in retirement. To do that, you may need to move beyond your regular employer super contributions and add a little bit more money to your super from either your before-tax pay or your after-tax pay. In this article, we look at ways to help boost your super and make it work better for you.
Making sense of super
It can be easy to fall into the habit of ‘set and forget’ in relation to your superannuation. You can see your super contribution - in your pay or in your super account - then move on to something else. You might think super is for later; it seems to take care of itself, so why pay attention to it?
But this mindset can hinder you from getting the best retirement possible and having control over when you want to retire. And while it’s true that retirement may not look the same for all people, it’s important to get the basics right. That may include putting together a strong financial plan which outlines some achievable goals, the right investment portfolio, and boosting your super above your super guarantee (SG) contributions. We’ll look at these in a little more detail in the next section.
Track your super and check your goals
Understanding your super and how it’s tracking is a great place to start. Check your statement. It will show how your super’s tracking, how it’s invested, your insurance arrangements, the transactions and taxes applicable, and the fees you’re paying.
It’s also good to know what you’re aiming for - in other words, how much money you want saved in your super for when you retire. We usually recommend that you do a budget to work out how much super you’ll need. Set yourself a rough retirement balance target to start with. If you’re not sure, you can use the ASFA Retirement Standard which determines that a ‘comfortable’ lifestyle for a couple (income of around $60,000 a year) requires a retirement balance of $640,000. It’s useful to check your statement or your online account to see if you’re on track to reach that goal. You can also try the ASIC MoneySmart retirement planner1.
VicSuper has great online tools to help you set, track and follow your super.
- The VicSuper Retirement Adequacy Calculator provides you with an indicative figure of your likely superannuation balance and the potential income and age pension you can expect to receive in your retirement. To read more, go to calculator.vicsuper.com.au/public/adequacy
- VicSuper’s Beeline is a great way to set, track and follow your goals. It’s an award winning online tool that helps VicSuper members set goals, manage contributions and investments and learn more about their financial position. To read more, go to vicsuper.com.au/beeline
Once you know how much want to have saved for retirement, you can look at ways to boost your super.
Before-tax contributions—a tax-effective way to add to your super
Salary sacrificing can be one of the most tax-effective ways to boost your super because your additional super contributions are taken out of your pay before your income tax is calculated, which lowers your taxable income. You don’t miss it in the same way as cash coming out of your bank account, and you don’t have to contribute a lot to make a difference. Even chipping in an extra $20 or $30 a week can improve the quality of your retirement. Salary sacrifice contributions are generally taxed at 15%, which is much lower than the top income tax rate of 45 cents in the dollar. You’ll need to check with your employer to ensure they can accommodate salary sacrificing—and please note contribution caps apply. To learn more, go to vicsuper.com.au/salarysacrifice
A personal deductible contribution is another tax-effective way to boost your super. You can make these contributions into your super and may claim them as deductions on your tax return. Contributions can be made either as a lump sum or as regular payments from your bank account or employer. Personal deductible contributions can be an alternative to salary sacrificing, especially for those self-employed. Note that there are additional requirements to be able to claim the deduction, e.g. providing a notice of intent to claim to fund. To learn more, go to vicsuper.com.au/super/growing-your-super/personal-deductible-contributions
After-tax contributions—strategies which add more to your super
Another way of boosting your super is through personal after-tax contributions. Adding more to your super account can make a difference over time due to the power of compound interest (earning interest on interest). Time and extra money invested in a tax-effective super scheme can make a big difference to how much money you have in retirement. You can generally make personal after-tax contributions if you’re under 75 years. To learn more, go to vicsuper.com.au/super/growing-your-super/personal-after-tax-contributions
Making contributions to your spouse’s super can boost their super as well as help you pay less tax. These kinds of contributions can be especially helpful where one spouse has taken time out of their career (child care, illness, etc.). Spouse contributions are made from take-home (after-tax) pay, so they’re not taxed again once they reach your spouse’s super account. To learn more, go to vicsuper.com.au/super/growing-your-super/spouse-contributions
A government co-contribution is a bonus super contribution made by the government that is designed to help people on lower incomes boost their super savings. The government co-contribution is available for people earning less than $53,564 per year. The government co-contribution reduces as your income increases above $38,564. To be eligible to receive the government co-contribution, you must make a personal after-tax contribution to your super account before the end of the financial year. How much you get depends on a) how much you add to your own super in personal after-tax contributions, and b) your total income for the financial year. Additional eligibility criteria also apply. To learn more, go to vicsuper.com.au/super/growing-your-super/government-co-contribution
At VicSuper, we can help you work out what is the most appropriate way for you to build your super savings. Because superannuation is a long-term investment, every dollar you add on top of your regular employer contribution can really add up. Learn more about our advice services at vicsuper.com.au/advice
There are many reasons why VicSuper is a lifetime choice for new members or members making the switch:
- Profit to member fund—we exist for our members, not shareholders.
- Competitive fees—we strive to grow your super, not whittle it away in fees.
- Solid returns, responsible investment—we aim to grow your retirement savings in a sustainable way.
- Award-winning* member service—super advice generally at no extra cost, personal and online coaching.
- Competitive insurance—size and scale mean we can negotiate better terms and premiums.
Learn more at vicsuper.com.au/whyvicsuper
*A 5 Apple rating (gold) is the highest rating from Chant West. For a super fund to earn 5 Apples it must be one of the ‘Highest Quality Funds’. Chant West is an independent organisation. For details on their ratings, criteria and methodologies see https:chantwest.com.au.