The recent report by Deloitte “Adequacy and the Australian Superannuation System” showed that even with an increase to Superannuation Guarantee to 9.5% from 1 July 2014, in 20 years time at least 75% of retirees will still receive all or part of the age pension to assist them in funding their retirement.This is an alarming statistic given that Australia’s superannuation system was designed to provide a retirement income for an aging population.
The following are my 9 considerations in a review of your own superannuation plan:
Fees charged by fund managers, fund administrators and by service providers can have a large impact on your overall return. Your fees should not be linked to how much you are contributing to your superannuation fund as it will cost you more each year for the same amount of work.
The investment strategy should be tailored to your own circumstances and objectives. Your investment strategy should be based on the outcomes you require and be adjusted accordingly. To simply accept a default investment strategy based on an industry “risk profile” may not provide you with the returns you need to achieve your goals.
The standard legislated employer contribution of 9.5% will not be enough for most Australians to rely on superannuation to fund their retirement. There is no limit on how much you can accumulate in superannuation, only how much you can contribute each year. You should be looking at ways of maximising your annual contributions. This can include salary sacrificing contributions before tax or making an after tax contribution.
Studies show that females have accumulated less in superannuation than males and face a bigger retirement shortfall. Strategies should be adopted where contributing to superannuation is a way of increasing overall family wealth. This may include salary sacrificing more of the spousal income or making after tax contributions to the spouse’s fund.
At certain stages in life ,you will have the opportunity to increase your superannuation contribution. This maybe when you are getting close to paying off your mortgage or receiving a pay rise. At these stages in life, rather than upgrading your home, you should consider the option of giving your superannuation a boost.
6.Transition to Retirement
You don’t have to wait until you retire to access your superannuation savings. It is possible to access your superannuation savings, depending on your date of birth, before you retire and maximise your contributions and pay less tax at the same time.
Frequently I hear people deciding to save for their retirement by borrowing to purchase a rental property. This comes with the risk of buying a single asset in a certain area in the hope that significant capital gains will offset years of poor returns. It is also possible to adopt a similar strategy in superannuation with less risk and over a broader range of assets in a tax effective way.
Some employer funds provide limited cover for life insurance, total and permanently disability insurance and salary continuance insurance. Insurance can be used tax effectively within a superannuation environment. It is however important to review the insurance cover provided to make sure it meets your wealth protection needs and is suitable for your circumstances.
Superannuation is not an estate asset and does not automatically form part of your estate when you pass away. It is important ,as part of your estate plan, to review who you should direct your superannuation benefits to taking into consideration tax and asset protection issues.
If you would like us to assist in reviewing your superannuation plan, please contact us on 0499976058.
Disclaimers & Disclosures
Geoff Ivanac is Sub-Authorised Representative No. 000309751 of GPS Wealth Ltd (GPS) ABN 17 005 482 726 Australian Financial Services Licence (No 254 544) and can provide the following services financial planning, risk management, managed investments, superannuation and retirement planning, margin lending and self-managed superannuation funds.
The information provided on this website has been provided as general advice only. We have not considered your financial circumstances, needs or objectives and you should seek the assistance of your GPS Wealth Ltd (GPS) Adviser before you make any decision regarding any products mentioned in this communication. Whilst all care has been taken in the preparation of this material, no warranty is given in respect of the information provided and accordingly neither GPS nor its related entities, employees or agents shall be liable on any ground whatsoever with respect to decisions or actions taken as a result of you acting upon such information.