Super in your 50's - You're on the home straight!
Written and accurate as at: Nov 02, 2016 Current Stats & Facts
If 50 really is the new 40, then life has just begun. The kids are gaining independence or may have left home, and the mortgage could be a thing of the past. Bliss. But galloping towards you is retirement! What should you consider be considering?
Increase your pre-tax contributions
You can ask your employer to reduce your take-home pay and make larger contributions to your super fund. If you are self-employed, you can increase your level of tax-deductible contributions. This strategy is commonly known as ‘salary sacrifice’.
If you are earning between $80,000 and $180,000 per year, any income between those limits is taxed at 39%. Salary sacrifice contributions to your superannuation fund are only taxed at 15%. Sacrificing just $1,000 per month to super will, over the course of a year, see you better off by $2,880 on the tax differences alone. Plus, the earnings on those super contributions will be taxed at only 15%, compared to investment earnings outside of super being taxed at your marginal rate.
Don’t overdo it though. If your salary sacrifice plus superannuation guarantee contributions add up to more than $35,000 a year, the excess is added to your assessable income and taxed at your marginal tax rate. This will become even more important with the Budget proposal to lower this figure to $25,000 pa from 1 July 2017.
Keep your money working
There is a tendency to opt for more secure, but lower-return investments as we approach retirement. However, even at retirement your investment horizon may still be decades. With cash and fixed interest producing some of their lowest returns in history, it may be beneficial to keep a significant portion of your portfolio invested in growth assets.
Insurance and death benefits
With the mortgage paid off or much diminished and a growing investment pool, your insurance needs have probably changed. You may be paying for cover you no longer need. Premiums may be quite high due to your age and that money might be better applied to boosting your savings. This is a good time to review your insurance cover to ensure it continues to be a match for your changing circumstances.
It’s also a good idea to check your death benefit nomination with your super fund. By making a binding nomination you can ensure that your death benefit goes to the beneficiaries of your choice, and may mean they receive the money more quickly.
Get a plan!
Superannuation provides many opportunities for boosting your retirement wealth. However, it is a complex area and strategies that benefit some people may harm others. Good advice is absolutely essential and the sooner you sit down with a licensed financial adviser, the better your chances of having more when you reach the finishing line.
Sources:
The Association of Superannuation Funds of Australia Ltd - ASFA Retirement Standard http://www.superannuation.asn.au/resources/retirement-standard/